An Outdated View on Modern Finance
Lord Adair Turner, the prominent technocrat known for reshaping banking regulation after the 2008 crisis, has recently voiced strong scepticism about cryptocurrency that appears remarkably disconnected from current financial realities. In an interview with City AM, Turner compared purchasing digital assets like Bitcoin to buying tulips during the 1637 Dutch tulip mania, dismissing them as purely speculative instruments with no inherent value.
Substance Over Speculation: The Numbers Don't Lie
Turner's core argument positions cryptocurrency as "pure financial engineering" that produces nothing of tangible worth. However, this perspective overlooks crucial evidence demonstrating cryptocurrency's established utility and resilience. Bitcoin processes approximately $50 billion in daily settlement volume and has survived for 15 years despite multiple 80% market corrections and persistent opposition from central banks worldwide. This track record substantially differs from the original tulip mania, which collapsed within just four months.
The article's author, Bepi Pezzulli, identifies Turner's fundamental confusion as mistaking financial infrastructure for mere speculation. When Turner claims cryptocurrency won't help deliver improved health services, he's technically correct but misses the broader point - similar to how the SWIFT payment network doesn't perform surgeries but provides essential financial infrastructure. Bitcoin enables cross-border transfers at significantly lower costs and faster speeds than traditional correspondent banking, while stablecoins settled an astonishing $27 trillion in 2024 alone, surpassing Visa's global volume.
Beyond Traditional Hedges: Cryptocurrency's Unique Value
Turner's comparison to gold inadvertently strengthens the case for cryptocurrency. While gold supply increases by approximately 1.5% annually through mining and requires trusted intermediaries vulnerable to failure, Bitcoin's 21 million coin limit is enforced by cryptographic consensus across approximately 17,000 independent nodes, eliminating counterparty risk entirely.
Peppizulli also challenges Turner's suggestion that property and equities serve as adequate inflation hedges. Property requires leverage, making it pro-cyclical precisely when hedges are most needed, while equities can deviate significantly from nominal GDP growth, as demonstrated by Japan's three-decade equity downturn despite positive cumulative GDP. Cryptocurrency functions as insurance against such tail risks, similar to how fire extinguishers retain value even when buildings don't burn.
The deeper irony lies in Turner's role at Oaknorth Bank, which uses data-driven credit analysis to reduce information asymmetries and intermediation costs - essentially the same goal cryptocurrency networks achieve through different means. While Oaknorth employs machine learning models and site visits, Bitcoin utilizes transparent, auditable ledgers and programmatic collateral to accomplish similar objectives.
When centralized crypto entities like FTX collapsed in 2022, they failed due to traditional financial pathologies - borrowing in fiat terms using fractional reserves - precisely the issues Turner spent his career combating. Meanwhile, decentralized protocols survived because their mechanics were auditable and their collateral programmatic, demonstrating the resilience of properly structured cryptocurrency systems.
