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Opinion

CME chief’s comments on bitcoin ‘fixed supply’ make no sense

Bitcoin Supply

Terry Duffy, CEO and Chairman of CME Group, recently stated that the fixed bitcoin supply – capped at 21 million – was one of the major reasons for slow regulatory approval. But this makes little sense.

One of the pieces of ‘bad news’ to emerge in the crypto press recently is that CME is discontinuing its bitcoin futures. Lack of uptake seems to be one of the issues, likely due to competition from the larger and more popular Cboe.

Terry Duffy, CME Group’s Chair, has commented that he thinks regulators have been slow to allow crypto projects to move forward because they can’t see how they will fit within the conventional financial system. Bitcoin has an algorithmically-fixed maximum supply of 21 million. Fiat money, meanwhile, is infinitely inflationary. Central banks can – and do – keep printing it ‘ad nauseam’.

So the implication is that combining these two systems is like mixing oil and water. They just don’t go together. (For the chemists among you – ok, yes it’s possible with an emulsifier. What the regulators are trying to figure out is what a financial emulsifier looks like, and Duffy says this is taking a while.)

Debt is the issue at the heart of this, according to Duffy’s comments. ‘The governments can’t run unless they can run on a deficit. I am trying to figure out why they would say, “Sounds good to me, because I want to be responsible and run everything on even-for-even basis. I can’t borrow against anything.”’ But that doesn’t make a lot of sense.

Digital gold

Gold has been around for millennia. It long predated our current fiat monetary system. Even when the dollar came off the gold standard, and the global de facto gold standard with it, gold didn’t suddenly go out of fashion. It’s still there, still popular, and it seems to coexist perfectly well with the mainstream financial system. Gold ETFs are thriving, with nearly $70 billion under management. But Duffy implies bitcoin is different.

It’s only different if you’re talking about adopting it as a widespread currency. That would be akin to going back onto a kind of gold standard. But we’re not talking about that, yet. No one seriously thinks that Bakkt or a Bitcoin ETF will open the door to BTC being used as an everyday currency. If that happens – whatever form it takes – it will be a parallel movement. Just like, if gold became a currency again, that would be separate from it trading in an ETF.

So Duffy’s comments about regulators’ caution are odd. I can’t help but feel that we’re missing part of the picture here, or else his ideas have been badly misrepresented.

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