Larry Summers, the former Secretary of Treasury of the Clinton administration, is impressed by blockchain technology and believes that it will change financial practice and exchange as we know it today.
Dr Larry Summers is no stranger to the world of finance. He was the Secretary of Treasury of the Clinton administration.
He has also served as the President of Harvard University and Chief Economist of the World Bank. When he makes a statement on matters concerning the financial sector, the world notices.
Speaking at Consensus 2016 in New York, Larry Summers says:
“Is the blockchain technology going to be fundamental? I think the answer is overwhelmingly likely to be yes. Is bitcoin going to be a valuable store of value, the same way as people use gold? I don’t know, but I think that certainly the answer is 'no' doesn’t seem like the right position to take.”
Intermediaries – the source of friction
What is the friction that Larry Summers is displeased with? It is the role that banks and other intermediaries play in the transfer of money. A simple transaction made with a credit card by a customer at a retail store could attract transaction fees of up to 2%. Bitcoin can reduce transaction fees to negligible amounts because it is decentralized and it removes the role of the intermediary.
Speaking at the Museum of American Finance on Wall Street, Larry Summers says:
“If the day ever comes where Bitcoin counts for an appreciable fraction of commerce which takes place in the world economy, on that day it will be because that commerce is regulated and subject to safeguards and people believe that something other than a mathematical algorithm is ensuring that their money will not be stolen.”
Differing Views from the Financial Sector
While Larry Summers is bullish about the prospect of blockchain technology, other stalwarts of the financial sector like Jamie Dimon have expressed views writing off Bitcoin and blockchain. Larry concedes that while Jamie Dimon is extremely smart, other smart people have been proven wrong before. He noted that even Bill Gates had underestimated the potential of the internet.
Larry Summers adds:
"While there are arguments you can’t get all the benefits [of blockchain] without Bitcoin, my suspicion is that ways will be found to get those benefits without the uncertainty in the value of Bitcoin relative to the ways people hold money and denominate transactions.”
Adviser to Digital Currency Group
The comments made by Larry Summers on blockchain are not one-off in nature. Summers truly believes in the potential of blockchain and has joined Digital Currency Group as a senior adviser in April 2016.
DCG is an investment firm focusing on the Bitcoin/blockchain technology space. DCG feels that its new advisers, including Dr Larry Summers and Gavin Andresen, will be critical in increasing adoption of blockchain technology and reaching a broad set of end-users.
Barry Silbert, CEO of DCG, says to Yahoo Finance:
"I've gotten to know Dr. Summers over the past few years, and it has been fantastic to see his thinking about digital currency and blockchain evolve and mature."