Western governments need to stop dismissing the crypto revolution as speculative and criminal, Mohamed El-Erian says
Mohamed El-Eriansaid western governments need to take the " cryptorevolution" more seriously.
- The economist said the West risks losing out to China, which is developing its own digital currency.
- El-Erian said regulators should stop seeing crypto as the purview of criminals and speculators.
Western governments should stop dismissing
El-Erian, writing in the Financial Times, said China has recognized the possibilities of crypto and is pushing ahead with projects that could see it dominate the new technology.
He said blockchain technology is becoming more important in finance, that some investors see cryptocurrencies as hedges against inflation, and that crypto-denominated payments are becoming more common.
"The time has come for more western governments to stop dismissing the crypto revolution as some mix of illicit payments schemes and reckless financial speculation," he wrote.
"Instead, they should be more open to embracing the innovations of crypto and channeling them in a better direction for finance, the economy and society at large."
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El-Erian, who is chief economic advisor at PIMCO parent Allianz, said there would have to be a trade-off between crypto companies and regulators. For example, crypto companies need better money-laundering controls, but regulators need to be more open-minded.
The cryptocurrency market has boomed in 2021, with major institutions such as JPMorgan and BNY Mellon becoming involved in trading coins and investing in blockchain technology.
But regulators are increasingly concerned about the volatile and highly risky market. In the UK, the financial watchdog has cracked down on the Binance exchange, while in the US, Democrat senator Elizabeth Warren has this week pushed for tougher regulations.
China has clamped down on cryptocurrency mining and payments, but is racing ahead with a central bank digital currency that has many similarities with cryptocurrencies.
El-Erian said in the FT that "the policy debate in western economies over crypto remains too narrow relative to the importance of the issues in play and excessively polarized."
He said China's digital currency is likely to jump borders and could provide a threat to the dollar's status as the global reserve currency.
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