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Crypto Hawks and Doves

Will cryptocurrencies usurp central banks' role as monopoly suppliers of money, and what implications would that have for financial stability? Interestingly, a number of different answers to these questions are emerging, as monetary policymakers become either cautious fans or committed foes.

LONDON – A few days ago, President Nicolás Maduro of Venezuela announced that his government had launched a new state-sponsored cryptocurrency called the petro. He claimed that $735 million worth of the new currency had already been sold, though observers are skeptical, unless state entities have been obliged to buy them. Even they will find it hard to do so, however, as the technology platform on which the petro will be traded has not yet been confirmed.

International demand for the petro will not be helped by recent pronouncements from Warren Buffett and Charlie Munger, the “sages of Omaha” who still control Berkshire Hathaway. Speaking of cryptocurrencies in general, Buffett was scathing. “I can say almost with certainty that they will come to a bad end,” he declared in January, while noting for good measure that he would be glad to buy put options on every one of them. Munger is, if anything, even more hostile, characterizing Bitcoin in particular as “totally asinine” and a “noxious poison.” Not much room for doubt there.

They are, of course, looking at Bitcoin as potential investments. The public authorities have slightly different concerns. Market regulators are interested in protecting investors, and have begun to issue warnings. Although these warnings have been sotto voce so far, I expect regulators will raise the volume soon, as the price gyrations continue. They should also be worried about the opportunities created for money launderers, and for trade in illicit drugs.

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