Former U.S. Treasury Secretary: Cryptocurrency is "a kind of digital gold" and is here to stay

Former U.S. Treasury Secretary Lawrence Summers said in an appearance on Bloomberg TV's "Wall Street Week" that cryptocurrencies offer an alternative to gold for people seeking assets that are separate from the day-to-day workings of government. He also said cryptocurrencies may still remain a feature of global markets like "digital gold," even if their importance in the economy remains limited.

Former U.S. Treasury Secretary Lawrence Summers, a believer in cryptocurrencies, once again expressed support for Bitcoin, saying that cryptocurrencies could become a feature of global markets like "digital gold" even if their current importance in economies is limited.

In an interview with Bloomberg, Summers said cryptocurrencies offer an alternative to gold for those seeking assets that are “independent of the day-to-day workings of government.”

Summers serves on the board of directors of Square Inc.; the payments company revealed in its first-quarter 2021 earnings report that its sales more than tripled, driven by a surge in bitcoin purchases in its Square Cash App.

“Gold has been the dominant asset of this type for a long time,” Summers said, but he believes cryptocurrencies “are here to stay” and can do so “as a form of digital gold.” “Cryptocurrencies have the potential to become a new consensus asset for people seeking safe wealth.”

If cryptocurrencies could reach a third of gold’s roughly $10 trillion total value, Summers said, that would be “a significant upside from current levels,” meaning “there’s a good chance that cryptocurrencies will be part of the system for quite some time to come.”

Bitcoin's current market value is about $683 billion, and if it reaches the market value of gold, the price of Bitcoin will increase by about 14 times or more.

A similar view is shared by Yassine Elmandjra, a cryptocurrency analyst at Ark Investment Management, who said earlier this month that if this were to happen, “it is not impossible for Bitcoin to reach parity with gold within the next five years.”

Lawrence Summers, meanwhile, said that cryptocurrencies are not important for the overall economy. According to him, they are also unlikely to become a major part of payments. In the interview, he once again reiterated his concerns about the risks of overheating of the US economy, saying that the Federal Reserve should be more vigilant about the threat of inflation.

“I don’t think the Fed’s plans reflect the potential severity of the problem,” he said. “I’m concerned that given everything that’s going on, the economy could be in trouble.”

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