Tags: Paul | Bitcoin | dollar | bank

Ron Paul: Bitcoin Could Be 'Destroyer of the Dollar'

Thursday, 05 Dec 2013 12:36 PM

By Michelle Smith

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Bitcoin could pose a serious threat to the dollar, warns former Rep. Ron Paul, R-Texas.

Last month, the value of Bitcoin surged from around $600 to more than $1200 after a meeting in which U.S. federal authorities appeared to give the virtual currency its blessing, MarketWatch reported.

Though the value has now eased back to about $1,000, it's clear that Bitcoin is garnering increasing amounts of attention.

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"There will be alternatives to the dollar, and this might be one of them," Paul told CNNMoney.

If people start using Bitcoin en masse, Paul said, "It'll go down in history as the destroyer of the dollar."

"Bitcoin really shows governments are behind the curve. It demonstrates there's a demand for an electronic equivalent of cash," University of Michigan professor Miles Kimball also told CNNMoney.

Granted, people may want alternatives to their current currency options. But Paul does not think those with interests in maintaining the current monetary system are such laggards that they will allow a mass conversion to Bitcoin without a fight.

That shift would pose threats to financial institutions whose businesses are dependent on people using their payment systems. And Paul believes those companies are likely to lobby.

Furthermore, for central banks, the ability to maintain control over currency is a powerful economic tool, and therefore, government authorities are also likely to be sources of opposition for Bitcoin, he added.

"Governments absolutely demand a monopoly on money and credit. They're not going to give it up easily," Paul warned. "They will come down hard."

This week, the People's Bank of China (PBOC) lent some credibility to that prediction. In addition to warning that Bitcoin is risky and rejecting that idea that it's a real currency, the PBOC forbid financial institutions from offering any services involving Bitcoin, MarketWatch reported.

Even Paul has admitted he is hesitant to embrace the digital currency.

"To tell you the truth, it's little bit too complicated. If I can't put it in my pocket, I have some reservations about that," he said earlier this year during an interview with Bloomberg TV.

"People want to see something they can know what it is, they can define it, touch it and put in their pocket," he said. With Bitcoin, "if you do not have a computer and someone running the computer and calculations, you don't have it."

"I am not a big supporter of that, but I am not opposed to it. I admit, I do not fully understand what is going on with it," Paul said.

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