Following the lawsuit against BinanceUS and Coinbase, Gary Gensler’s statement that cryptocurrencies are not necessary due to the existence of fiat currencies like the U.S. dollar and euro is a simplistic view that overlooks the fundamental differences and potential benefits that cryptocurrencies bring to the financial system.
Cryptocurrencies vs Fiat Currencies
Firstly, it’s important to note that cryptocurrencies offer features and advantages that traditional fiat currencies do not possess. Cryptocurrencies are decentralized and operate on blockchain technology, which provides transparency, immutability, and security. These qualities make cryptocurrencies resistant to censorship and fraud, allowing for peer-to-peer transactions without the need for intermediaries like banks. The underlying blockchain technology also enables programmability, allowing for the creation of smart contracts and decentralized applications, which can revolutionize various industries beyond finance.
The Launch Of New Cryptocurrencies
Furthermore, the launch of more cryptocurrencies can be healthy for the general crypto industry. Increased competition promotes innovation, as different projects strive to offer unique features and improvements over existing cryptocurrencies. This drives technological advancements and fosters creativity within the industry, benefiting users with more choices and potentially superior solutions. Additionally, a diverse ecosystem of cryptocurrencies provides investors with a broader range of investment opportunities and allows for portfolio diversification.
Digital US Dollar?
Regarding Gensler’s assertion that fiat currencies like the U.S. dollar and euro are “digital,” it is important to clarify that while these currencies have digital representations in the form of electronic transactions, they are ultimately controlled and issued by central authorities, such as central banks. The U.S. dollar and other fiat currencies are subject to government policies, regulations, and central bank decisions, which can lead to issues such as inflation, quantitative easing, and geopolitical influences. In contrast, cryptocurrencies operate independently of any central authority, often with predetermined monetary policies, making them resistant to governmental manipulation and potentially offering a hedge against traditional financial risks.
Final Thoughts
In conclusion, while fiat currencies serve a crucial role in the global economy, it is misguided to claim that they render cryptocurrencies unnecessary. The launch of more cryptocurrencies can contribute to a healthy and vibrant crypto industry, fostering competition, innovation, and offering distinct advantages over traditional financial systems. Cryptocurrencies bring decentralization, security, programmability, and the potential to revolutionize various industries. Therefore, it is important to recognize the unique value proposition that cryptocurrencies provide and to foster their responsible development and adoption alongside existing fiat currencies.
Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any projects.
Image Source: Photo by Kanchanara on Unsplash // Image Effects by Colorcinch
