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Tsinghua University Professor Explains Cryptocurrencies’ Fundamental Value as Currency or Asset

Cryptocurrencies in general have fundamental value though it probably does not justify current prices, a Tsinghua University professor has said while shedding light on some of the motivational needs that he thinks make a cryptocurrency like Bitcoin a currency or an asset at the World Economic Forum 2019 in Davos, Switzerland.

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Zhu Ning, who is the Associate Dean at the University’s National Institute of Financial Research, argued that a cryptocurrency could be used as a currency despite many already exist because of its anonymity feature which could allow users engage in certain transactions without being identified. Another popular argument he cited is its efficiency – fast and cheap cross border; and a bit of the identity issue which gives the younger generation a sense of being a part of the future.

For its fundamental value as an asset, Zhu explains:

“I advised some of my students to diversify part of their assets into cryptocurrency in the past two years just a way of diversifying into some risky bet maybe it would pay off. And of course, unfortunately, it did not in the past year. But then, that is a need for an asset: anything new can be a valid asset as long as there is demand for diversification and hedging. That is real need. The other need is the hedge against the entire monetary system. What if all central governments decide to print more money, is there someone else I can store my value and retain them? The last one – I feel that more clearly in China – is about catching up with the Joneses. In China, the peer pressure is so much for you to make money and if you have missed the housing boom or bubble then this is the thing. Even though you have no knowledge at all about this thing, you want to do some speculation.”

Zhu adds that at first, China seems to encourage the development of cryptocurrency as an alternative to sort of try to reshape the global financial system. However, that has changed quite considerably in the past two years due to two key reasons.

First is the concern that many people are trying to use cryptocurrency as a way to circumvent capital control which is a very big concern for regulators. The other is more about consumer protection especially those investors who do not know much about the space but were just pouring their life savings into cryptocurrency which later got wiped out. He cited these reasons why cryptocurrency-related projects are not grouped as a part of fintech sector now in China.

“These days, I think the narrowly-defined fintech companies are trying to distance themselves away from cryptocurrencies and probably,” Zhu says to the gathering at the panel on Building a Sustainable Crypto-Architecture. “In China, if you say something about fintech, it’s more about peer-to-peer lending, about crowdfunding.”

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