Can cryptocurrency ever be fully trusted? This was a central question facing panelists for a conversation at the recent Partners in Business Ethics Symposium, held at Questrom School of Business on October 11-12. Titled “Crypto: Trusting Non-Fiat Currency,” industry and academic experts, including Questrom Executive-in-Residence and Master Lecturer, Finance Mark Williams, the discussion revolved around ways in which new currencies were changing the way financial markets handled the all-important issue of trust in a digital age.
Mark was joined by Bill Irving, Chief Investment Officer for the Global Asset Allocation Division of Fidelity Investments, and Eric Rosengren, former President and CEO of the Federal Reserve Bank of Boston. Together, the three explored the explosion of popularity in cryptocurrencies over the past decade. Their discussion addressed the advantages of this technology- for example, digital currencies do not depend on banks, governments, or indeed any centralized authority, making them difficult to tamper with or manipulate. They can also serve as a hedge against sudden and dramatic inflationary spikes for local currencies, as Eric pointed out through the example of Argentinian farmers losing much of the value of their savings by the devaluation of the peso. However, cryptocurrencies bring risks of their own- transaction friction, energy costs to maintain the “distributed ledger” that tracks ownership and transactions, and susceptibility to hacking, fraud, and wild price swings.
Ultimately, the panel concluded, some form of digital currency was likely inevitable- but perhaps not in its current “wild west” form. So-called CBDCs, or Central Bank Digital Currencies, are a promising middle ground between fiat and unregulated cryptocurrency, with national banks issuing and regulating digital forms of their fiat monies. If pursued, CBDCs could offer consumers the ease and fluidity of digital money without the volatility and lack of regulation that makes current cryptocurrencies such a risky proposition.