Charlie Munger, the 98-year-old billionaire, said that digital currencies are a combination of delusion and fraud. After the FTX exchange collapsed, he cited the two elements are a dangerous combination.
Munger referred to the use of the currency as good for kidnappers, for example. Conversely, the government and major banks are experimenting with crypto. For example, the NY Fed is launching a digital dollar pilot program with bank banks. TD Bank (TD), PNC Bank, and Wells Fargo (WFC) are among the banks involved.
Global bank systems would benefit from a digital money platform. It depends on a regulated liability network and a distributed ledger. Blockchain technology supplies that.
China developed a digital yuan in several provinces. Chinese have access to this currency on the app, WeChat, run by Tencent (TCEHY).
Crypto investors should heed Munger’s warning but should not avoid the crypto sector entirely. FTX is proof that the sector needs regulation. For example, exchanges need checks and balances to prevent customer deposits used as collateral without consent.
As the crypto industries cool, the government may develop better solutions to prevent Ponzi schemes. Crypto blockchains have many use cases that could facilitate monetary exchange in the global marketplace.
