A member of a congressional group set to look at the national security implications of the US economic relationship with China said Thursday that bitcoin poses no threat to the US dollar despite Peter Thiel’s opinion.
In particular, Bitcoin does not compete effectively with fiat currencies because of its unstable price, said Alex Wong, a member of the US-China Economic and Security Review Commission appointed by Congress in October to evaluate US-China relations.
During his hearing on Thursday, Wong made the comment after asking an expert about the accuracy of Thiel’s recent claim that Bitcoin posed a threat to the US and would benefit Beijing.
“I think the characteristics that make bitcoin attractive don’t make it really competitive with fiat currencies because when you buy a bitcoin you don’t really know that it will be twice as much or 20% less tomorrow,” said Wong . “It’s extremely volatile.”
Yaya Fanusie, an additional senior executive at the Center for a New American Security and an expert in question, replied that the American entrepreneur’s concerns were “exaggerated.”
Fanusie said Thiel was referring to the fact that the computing power for mining Bitcoin is heavily concentrated in China, so the country might be able to hold and control Bitcoin. In reality, this is not a problem due to the decentralized nature of the Bitcoin network.
“If ever there was a case where there was so much national safety levers or drawbacks, it’s not that additional mines couldn’t be built outside of China,” Fanusie said.
Thiel, co-founder of the digital payment giant PayPal, a Bitcoin maximalist and early supporter of Ethereum, criticized American tech companies like Facebook and Google for their connections to China. In 2004 he co-founded the technology company Palantir, whose customers include the CIA and FBI intelligence services, according to TechCrunch.
Bitcoin isn’t as effective at breaking sanctions as it seems, and stable coins are more likely to compete with fiat currencies in the future, according to Wong.
“They are less likely to compete with the US dollar than with countries that have limited access to regular dollars and use stablecoins as a substitute,” Wong said of stablecoins. Meanwhile, the People’s Bank of China, the country’s central bank, has made it clear that the proposed digital yuan will be the only stable yuan used in China.