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What Paul Krugman Gets Wrong About Crypto
Every time New York Times economist Paul Krugman doomsays cryptocurrency, we like to remind people of his infamous 1998 prediction about the impact of the internet on business and commerce. Turns out we are not alone.
In the wake of FTX, Krugman once again predicted the demise of the crypto industry but Cointelegraph isn’t having it.
Underpinned by this misunderstanding about the general nature of crypto assets and, in particular, of Bitcoin, Krugman arrives at conclusions that, despite being coherent within themselves, are completely mistaken, such as, for instance, his argument that the crypto industry would not survive increased levels of regulation. In 1998, when discussing a comparable topic, Krugman wrongly stated: “By 2005, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s.” His bias against crypto assets may lead to predictions as inaccurate as his now-infamous quote about the future impact of the internet.
Well-designed regulation for companies that provide services associated with crypto assets is welcomed by the vast majority of industry participants and is actually perceived as a development that would foster the confidence among investors needed to propel this technology toward mass adoption. Furthermore, many of the services offered by these companies are of a financial nature and, as the successive events that have occurred this year have shown us, contagion effects exist. This in itself justifies the need for greater regulation. Just as Krugman stated in the first line of his op-ed, “recent events have made clear the need to regulate crypto.” He was correct on that point.
It's likely that the crisis created by FTX will spur regulators to expedite their efforts around the world and, consequently, help to consolidate crypto assets and blockchain technology. Just as Krugman’s misguided predictions haven’t meant the demise of his reputation, this crisis is not the end game for crypto.