Former UK Prime Minister Boris Johnson did not hold back his opinion of Bitcoin when he made headlines by describing it as a “massive Ponzi scheme” and shook up the financial sector. In a highly controversial opinion piece published recently in the Daily Mail, the former leader took direct aim at the popular digital asset. After sharing his column online, his post rapidly accumulated millions of views, igniting a passionate battle between traditional finance advocates and prominent cryptocurrency defenders.
A Costly Lesson in an English Village
Johnson anchored his critique in a personal anecdote from his home village in Oxfordshire. A local man spoke about how his investment also got him into a lot of trouble. He invested in a £500 scheme because an acquaintance told him that he would double his money. Nonetheless, he was tricked! After conclusion of his first deposit, he realized that there will be no refund of his initial money, causing him to feel despaired. Over three years, the man was coerced into paying continuous recovery fees, ultimately losing roughly £20,000 and leaving him struggling to cover his everyday living expenses.
Questioning the Foundation of Digital Money
Using this local tragedy as a springboard, Johnson launched a broader attack on the mechanics of Bitcoin. He maintained that the cryptocurrency itself held no value but rather exists only by the collective effort of the people who buy it. He described this cryptocurrency as being just an arbitrary series of numbers and as having a host of dangers associated with a fully decentralized currency system. He pointed out that the absence of a central bank to back the networks leaves everyday, non-institutional investors with no protection if their funds disappear. He stated that modern fiat currency and Roman coins have endured as currencies because they are backed by the government responsible for issuing them.
The Danger to Everyday Investors
The ex-Prime Minister voiced a serious concern for society’s long-term impact because of these major financial losses. He indicated that the public has lost trust in their money as more stories come to light about regular people who have lost their entire retirement holding accumulated through their working life. Johnson believes that the digital-asset industry depends upon having a constant stream of new unknown investors to increase value, and this cycle of predatory behaviour will only continue until it breaks down, creating a large number of unhappy people and a large number of people who will have lost a considerable amount of their wealth.
Industry Heavyweights Fire Back
The crypto-community reacted quickly against, what they saw as unfairly harsh, criticism directed towards them. The major industry advocates (most notably Michael Saylor, founder of MicroStrategy), immediately dismantled the central premise of Johnson’s argument. As Saylor so eloquently explained on Twitter, structural elements in Bitcoin do not lend themselves to characterising this asset as a Ponzi activity; there is no central party providing false promises of guaranteed returns. Additionally, all traditional types of financial fraud rely heavily upon one party paying out a partial amount to previous participants using the funds of new investor participants. Bitcoin, by nature, is a completely transparent, open-sourced network that has absolutely no corporate issuer or national promoter.
The Ongoing Debate Over Digital Assets
The global discussion of whether or not there is legitimate value in digital currencies has been ignited again due to the recent high profile clash between Ripple and the US Government. Despite the clarion call for caution being made by sceptics like Lucy Johnson regarding rampant speculation leading to losses in value of digital currencies, many supporters tout the benefits of transparent, fixed supply financial systems that accompany digital currencies as well. Certain analysts monitoring the clashes noted an additional irony; that during Andrew Johnson’s previous term as Prime Minister and Chancellor of the Exchequer he was exploring progressive policies to support both cryptocurrency and non-fungible tokens. Regardless of how Johnson acts in the future relative to his previous policy decisions, it is clear that our global financial infrastructure still requires resolution before we arrive at a unified medium of exchange.
