MICHEL MARTIN, HOST:
Let's talk about the explosive growth of Bitcoin. That's the digital currency founded in 2008. It started being adopted in 2009. It surged past a hundred thousand dollars per coin in the last few days, catching the attention of investors as well as skeptics. At The New York Times DealBook Summit this week, the Federal Reserve Chair, Jerome Powell, compared it to gold.
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JEROME POWELL: People use Bitcoin as a speculative asset, right? It's like gold. It's just like gold only it's virtual. It's digital. People are not using it as a form of payment or as a store of value. It's highly volatile. It's not a competitor for the dollar. It's really a competitor for gold.
MARTIN: So does this surging value make Bitcoin safer as an investment or still just a gamble? And what difference might the incoming Trump administration make since the president-elect and a lot of his allies are fans? We called Henry Hu for another perspective. He teaches corporate law, modern finance and securities regulation at the University of Texas Law School. Good morning, Mr. Hu.
HENRY HU: Hi, Michel. How are you?
MARTIN: I'm great. So let me start with that quote from the Fed chair. Should we think about it more like gold than the dollar? What do you think?
HU: Well, I think the analogy to it being gold is really inapposite in a lot of ways. For one thing, gold has genuine intrinsic value in the sense of, for instance, jewelry and other ornamentation that, for thousands of years, across societies in Africa, Asia and Europe, that have absolutely no contact with each other - they value gold as ornamentation. There's something in the human psyche. Also, gold is incredibly useful in electronics and other kinds of electronic applications. And in terms of the - Chairman Powell referring to characterizing - in effect, characterizing gold as not a store of value. Well, why does Fort Knox hold lots of gold?
MARTIN: Well, OK, but I think...
HU: All...
MARTIN: ...Your basic point here is that gold has intrinsic value...
HU: Yes.
MARTIN: ...And Bitcoin does not. I think that's your - is that the kind of...
HU: That's right.
MARTIN: ...Where you're driving to? All right. So - and national currencies, currencies associated with nation-states have intrinsic value because the nation-states stand behind it. Would that be correct?
HU: That's right. They grant a monopoly on the national currency. With Bitcoin, there is - now, I do not know what the price of Bitcoin will be a year, 10 years from now. It may well go up. But in terms of Bitcoin, you - there's no North Star for figuring out what the value is. You are counting on what other people will pay in the future for Bitcoin. So it's - you have to kind of make a guestimate in terms of, you know, what people think about Bitcoin.
MARTIN: OK.
HU: Bitcoin, you can't wear and...
MARTIN: ...Live in it or, you know, build it as a company. OK, let me - here's the argument from Bitcoin supporters.
HU: Right.
MARTIN: They say cryptocurrency is the future of the global financial system because its decentralized nature makes it resistant to inflation. With inflation being such a huge challenge right now for so many people, what do you say to that?
HU: Well, Bitcoin is one particular cryptocurrency. Who is to say that there will be some other cryptocurrency that will come along that would be somehow more attractive, more resistant, for instance, to advancements in quantum computing? You know, a more difficult puzzle that computers can't solve - that nobody's given Bitcoin a monopoly. Sure, they're very popular now among the first, but it's not like national currency where there is this kind of monopoly. There is no kind of natural monopoly associated with Bitcoins.
MARTIN: OK. So President-elect Trump, as we said, is nominating a pro-crypto SEC chair, so we're expecting a much more favorable regulatory environment. As briefly as you can, could that make cryptocurrencies more stable and less of a gamble? Or do you think it might be the opposite in some ways?
HU: Oh, it does both increase - it certainly increases demand. Also, the legitimacy of cryptocurrencies. In terms of there's much greater regulatory certainty with Chairman Atkins coming in, who is a big fan of crypto with joining Commissioner Peirce. So there's going to be more - less legal uncertainties associated with cryptocurrencies. And with less uncertainty, the product becomes more attractive.
MARTIN: Interesting. Henry Hu teaches at the University of Texas Law School. Professor Hu, I'm guessing we're probably going to be talking again about this. Thank you so much for joining us.
HU: Thank you, Michel. Transcript provided by NPR, Copyright NPR.
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