Below is my rebuttal to Paul Krugman, a prominent and frequent critic of cryptocurrency. As evidenced by his latest column, Krugman disdains crypto.

Sure, Krugman enjoys considerable prestige as a member of the country’s elite commentariat. However, I’m reminded of this dialogue from the 1977 movie Annie Hall:

Alvy Singer (as played by Woody Allen): “Hey, Harvard makes mistakes too! Kissinger taught there!”

Although Krugman is a widely influential columnist for The New York Times, well… The Times makes mistakes, too.

First they ignore you, then they laugh at you, then they fight you, then you win.

For the first few years after the creation of Bitcoin (BTC), cryptocurrency was seen by most as nothing other than magic Internet money that was played with by overweight guys who lived in their mother’s basement. At least, that was the majority opinion of the minority of people who had even heard of Bitcoin.

Of course there were some people early on who at least on the surface understood Bitcoin, but still thought it wasn’t worthy of their time, thought, or money.

Then there were those who understood from the very beginning.

The pioneers of Bitcoin, Satoshi Nakamoto and the cypher punks, proclaimed that Bitcoin was a major improvement on the broken monetary system. You see, even the staunchest Bitcoin critic would admit that the current economic and monetary systems aren’t without flaw. Whether or not Bitcoin fixes those flaws depends a lot on whom you ask.

If you’d ask me, Bitcoin improves the current monetary system through its decentralization. There is no central authority like a government or bank controlling its supply or transactions, no central single point of failure. This prevents any single entity from manipulating monetary policy, providing greater transparency and security.

Additionally, Bitcoin has a fixed supply of 21 million coins, which limits the creation of new Bitcoin and safeguards against inflation. In contrast, traditional fiat currencies are managed by central banks and can be printed in excess. That is a one-way road which can lead to overinflation, currency devaluation, and loss of purchasing power.

By fixing supply, Bitcoin provides a hedge against inflation and helps preserve value over time.

I’m deeply tired of hearing how crypto is nothing but a giant house of cards filled with rampant fraud. These claims are never backed up by any factual evidence or data. Rather, the critics will pick and poke at one or two cases of fraud from a network that does more than 700,000 transactions per day.

Factless Claims of Pervasive Fraud

Krugman also reiterates the same tired trope that Bitcoin and the crypto ecosystem are nothing but hollow and without any real value. He characterizes crypto as “a naked emperor” clothed in nothing but fraudulent money.

Critics often point to fraud cases in the crypto space, such as the collapse of FTX and Sam Bankman-Fried’s criminal conviction for multiple cases of fraud. However, it is important to note that fraud exists in every financial system, not just crypto.

Take Bernie Madoff’s infamous Ponzi scheme, which defrauded investors of billions over decades. Or consider the 2008 financial crisis, sparked by the reckless behavior of traditional financial institutions selling toxic mortgage-backed securities.

These examples show that fraud is not unique to crypto; traditional finance (TradFi) has a long history of deception, corruption, and mismanagement. Enron, Lehman Brothers, and Wirecard are further proof that scams occur in all financial systems.

It would be incorrect to judge crypto solely by its bad actors, just as we wouldn’t dismiss the entire stock market or banking system due to the actions of a few bad players. While Sam Bankman-Fried’s fall from grace was highly publicized, he is not representative of the broader crypto industry. Just as Madoff wasn’t representative of all hedge fund managers, Bankman-Fried’s actions are not reflective of an entire market.

In fact, with its transparent, decentralized nature, blockchain technology holds the potential to reduce fraud through publicly accessible, tamper-proof transaction ledgers. Moreover, data suggests that crypto fraud, while highly publicized, comprises a small fraction of the overall activity in the space. Chainalysis’ 2022 report showed that illicit crypto transactions accounted for less than 1% of the total market.

Crypto Is Defending Itself, Not “Buying Elections”

The idea that the crypto industry is “buying elections” is a misrepresentation of what’s actually happening. Yes, political donations are being made, but that’s far from unique to crypto.

Virtually every major industry, from pharmaceuticals to banking to energy, contributes to political campaigns. It’s an inherent part of how American democracy operates, with industries supporting candidates that align with their goals and values. To single out crypto is to ignore this fundamental aspect of the political system. The crypto industry is, in fact, on the defense, not the offense.

The crypto space has faced unprecedented regulatory pressure from the Biden/Harris administration. Led by U.S. Senator Elizabeth Warren (D-MA) and SEC Chair Gary Gensler, the administration has cracked down on the industry through heavy-handed enforcement, ambiguous regulations, and lawsuits.

The SEC has sued companies like Ripple, Coinbase, and Binance, while regulators have targeted crypto-friendly banks through actions often referred to as Operation Chokepoint 2.0. This policy has led to the closure of legitimate crypto banking services, disrupting the market and creating uncertainty. All of this has occurred without clear regulatory guidance, leaving the industry in a precarious position.

Crypto’s political donations are a reaction to these attacks. When one political party, in this case, the Republicans, expresses a willingness to hear the industry’s concerns and provide a clearer regulatory framework, it’s no surprise that the industry would support those candidates. The Biden/Harris administration, on the other hand, has shown little interest in working with the sector and has instead used enforcement as its primary tool, creating an adversarial relationship.

Accusing the crypto industry of “buying elections” also implies that political donations are inherently evil, which is far from the truth. Every industry, whether it’s Big Tech, health care, or finance, donates to politicians and lobbies for its interests. This is how policy is shaped, and to suggest otherwise is simply specious.

The crypto industry’s donations are not about manipulating democracy but rather about defending itself from an administration that has, thus far, shown no interest in its survival or growth.

Feelings, Not Facts

At the end of the day Krugman falls into the same trap that many crypto skeptics have become victim to over the years. He judges Bitcoin and the entire crypto industry based on his feelings, his initial gut reaction to “magic Internet money,” and not fact-based evidence. He certainly isn’t the first person to react to Bitcoin with an immediate dismissal.

Even I initially dismissed Bitcoin, until I learned otherwise and made a fortune in crypto. Now one of my goals in life is to evangelize for crypto and help make others rich from it.

Critics like Krugman have been presented with ample evidence as to why they should not dismiss Bitcoin and the crypto industry at large. He’s been shown the flaws of the traditional finance system and the improvements Bitcoin can make to it.

The data shows that the claims of rampant fraud are not rooted in truth, but rather blown out of proportion. Who can blame the industry for pushing back against the current administration and donating to politicians who promise to end the hostility and regulate the space with fairness?

Alas, Paul Krugman is hardly the first Bitcoin critic to slander the industry, and he is unlikely to be the last. In fact, he is hardly the first intelligent economist to come out against crypto, and he won’t be the last. However, as loud as the critics can be, Bitcoin remains steadfast and resilient, unbothered and unchanging. It’s resoluteness has turned even some of the loudest critics into believers over time.

​​Bitcoin’s strength lies in its ability to endure skepticism and thrive despite opposition. As history shows, resilience wins over disbelief.

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