Paul Krugman Tags Crypto Market As 'Post Modern Pyramid Scheme'

In an op-ed for The New York Times, renowned economist Paul Krugman described the bitcoin market as a "postmodern pyramid scheme" and that this year's tremendous market catastrophe presents an opportunity for federal regulation, Jennifer Sor reported for Business Insider.

Photo Insert: The whole crypto market capitalization has now plummeted to less than $900 billion from a November high of $3 trillion.

The outspoken crypto critic, who earlier dubbed the digital asset the "new subprime," said that the industry has not yet developed products that are valuable to the actual economy, but has instead successfully positioned itself as cutting-edge and respectable.

According to Krugman, crypto developed into a type of postmodern pyramid scam. "The industry lured investors in with a combination of technobabble and libertarian derp; it used some of that cash flow to buy the illusion of respectability, which brought in even more investors. And for a while, even as the risks multiplied, it became, in effect, too big to regulate."

His most recent broadside against cryptocurrencies comes after the stablecoin Terra and its sibling token Luna plummeted in May, causing a domino effect of crypto businesses that froze customer withdrawals or declared bankruptcy.

The whole crypto market capitalization has now plummeted to less than $900 billion from a November high of $3 trillion.

Krugman also mentioned Fed Vice Chairman Lael Brainard's speech from last week, in which she stated that the recent crypto sell-off shed light on "serious vulnerabilities in the crypto financial system," as the appeal of a decentralized currency frequently made the space a haven for fraud, money laundering, and other financial crimes.

Meanwhile, the payment applications Venmo and Cash App permit digital money transfers. In addition, prestigious colleges, including Princeton, Harvard, and MIT, provide courses on blockchain navigation.

"Why were these mainstream institutions and people lending cover to what as Brainard made clear, a highly dubious industry?" Krugman asked.

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