Dr. Doom’s Crypto Embrace? We’re All Just Figuring Things Out
Nouriel “Dr. Doom” Roubini looks to be embracing crypto, at least in a roundabout way, after years of building a reputation as one of the most critical, skeptical, weary-eyed observers of the industry. Bloomberg reported on Monday that the economist, who is known for his bearish views, is working with a Dubai-based financial firm, Atlas Capital, which is reportedly engaging Web 3 firm Mysten Labs to build the “United Sovereign Governance Gold Optimized Dollar,” or “USG.” It goes without saying that this project is mostly still in “ideation,” and that the details will be worked out and are likely subject to change. But the general sketch is: Roubini, arch crypto critic, will help develop a “more resilient dollar” backed by real assets, including U.S. Treasurys, gold and real estate investment trusts. There’s more. The digital asset is meant to be inflation resistant and a way to bring a wider group of people under the ropes of high finance – perhaps, ultimately, if things play out, act as a global reserve currency. We here at CoinDesk applaud financial innovation, risk-takers and those willing to put ideas into practice. We especially recommend those who are looking to fix the myriad problems of the post-industrial, ultra-financialized economy. And so, as a show of respect, we say go for it, see what happens, why not? If Roubini wants to tackle problems, rather than finding fault, more power to him. Careful observers might note that the “United Sovereign Governance Gold Optimized Dollar” resembles another project that had ambitions of Global Reserve Status and to help underserved communities: Libra! Facebook’s Libra! Libra, you may recall, was the first iteration of a Facebook-backed crypto project that wanted to “bank the unbanked.” It would have been a digital coin backed by a basket of fiat currencies, Treasurys and other financial instruments. (Mysten was founded by former Meta Platforms. – formerly Facebook – engineers.) The project never launched, partly because Facebook burned its reputation to the ground selling our data and potentially destabilizing democracy. So regulators worldwide acted on our behalf to say that Facebook – with its billions of users and foothold within the internet – couldn’t be trusted with a radical new attempt for currency design. Roubini’s project is similarly ambitious – creating an alternative safe haven asset to U.S. Treasurys that also has “payment features.” It might also offer yield, making it more attractive to hold, although in a blog post, Roubini notes that USG’s fluctuating value may limit its use as a form of payment. Roubini et al in that blog cited a few risks to the greenback’s hegemony: inflation, dollar debasement, the rising influence of China and something called Triffin’s Dilemma related to the U.S. debt load (or, “twin fiscal and current account deficits”). Still, USG wouldn’t exactly compete with the dollar and could complement a central bank digital currency (CBDC), Roubini suggested. Indeed, the world is changing and the economy is getting … weirder. Crypto is both a source of this changing environment and also home to a number of people who want to fix what’s broken. Crypto is not an academy, but rather a source of a lot of ideas. And a lot of potential solutions. The beauty of the industry isn’t that it pretends to have the answers, but that it is willing to experiment. Not all these will pan out, though if we’re open-minded, we might learn something. For instance, this weekend, an incredibly popular and risky “algorithmic stablecoin” called UST lost its peg to the U.S. dollar after a number of investors sold and after significant quantities were withdrawn from decentralized finance (DeFi) liquidity pools. That depegging could have doomed UST, which relies on the arbitrage opportunity with another crypto, luna, to maintain its peg to the U.S. dollar, especially because at least so far no algo stablecoin has worked. UST’s principle backer, a fellow named Do Kwon, also says he’s motivated by a sense of fixing what’s wrong within the financial system and expanding the range of financial options available to people. It’s a noble pursuit, perhaps. He could be lying or wrong. But, if Roubini is anything to go by, we’re all still figuring it out. –Daniel Kuhn | 