A member of a Congressional group tasked with looking at the national security implications of the U.S.’s economic relationship with China said Thursday that bitcoin is no threat to the U.S. dollar, despite what Peter Thiel thinks.
Specifically, bitcoin does not compete effectively with fiat currencies because of its unstable price, said Alex Wong, a member of the U.S.-China Economic and Security Review Commission created by Congress in October to evaluate the U.S.-China relationship.
During its hearing Thursday Wong made the comment after he asked an expert witness about the accuracy of Thiel’s recent claim that bitcoin would be a threat to the U.S. and that it would benefit Beijing.
“I think the characteristics that make bitcoin attractive make it not really competitive with fiat currencies because when you buy a bitcoin, you don’t really know it’s going to be twice as much or 20% less tomorrow,” Wong said. “It is extremely volatile.”
Yaya Fanusie, an adjunct senior fellow at the Center for a New American Security and the expert witness in question, responded that the American entrepreneur’s concerns are “overblown.”
Fanusie said Thiel was referring to the fact that computing power to mine bitcoin is heavily concentrated in China, so the country could be able to hold and control bitcoin. In reality, he claimed, that would not be an issue due to the bitcoin network’s decentralized nature.
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“If there were ever a case where there was so much national security leverage there or disadvantage, it’s not like additional mining couldn’t be built outside of China,” Fanusie said.
Thiel, the co-founder of digital payment giant PayPal, a bitcoin maximalist and early backer of Ethereum, has been critical of American tech companies such as Facebook and Google for their ties to China. He also co-founded the technology firm Palantir in 2004, whose clients include the CIA and FBI intelligence agencies, according to TechCrunch.
Bitcoin is not as effective for busting sanctions as it appears and stablecoins are more likely to compete with fiat currencies in the future, according to Wong.
“It is less likely they compete with the U.S. dollar than it is to countries that have limited access to regular dollars and use stablecoins as the substitute,” Wong said of stablecoins. Meanwhile, the People’s Bank of China, the country’s central bank, has made it clear its planned digital yuan will be the one and only yuan-pegged stablecoin used in China.