- Bitfury Group CEO Brian Brooks, who previously headed the federal government's Office of the Comptroller of the Currency, said crypto valuations should not be tied to the idea they can replace the U.S. dollar, during a discussion at the Aspen Ideas Festival.
- Rather, Brooks said, cryptocurrencies should be viewed as replacing the system of transmitting value.
- Despite the recent failure of stablecoin TerraUSD, Brooks said he was bullish on the concept of stablecoins playing a bigger role in the banking system in the future.
Crypto prices should be viewed more like internet stocks than currency, said Brian Brooks, the former U.S. Acting Comptroller of the Currency during the Trump Administration.
The biggest misunderstanding around cryptocurrencies is that if they're "not doing a great job of replacing the U.S. dollar, then crypto is failing in its mission," Brooks, now the CEO of bitcoin mining and crypto tech company Bitfury Group, told CNBC's Ylan Muii at the Aspen Ideas Festival on Monday.
"Most of crypto is about replacing the centralized banking system with networks that allow user control versus bank control ... the crypto assets that have prices are more like internet stocks," Brooks said. "It's more like you bet on Google if you think there's going to be high internet traffic; if you short it, it's that people are going to go back to the post office, right? But it's not that ethereum or Ripple or anything else is trying to replace the U.S. dollar, it's trying to replace the system of transmitting value," he said.
The entire crypto market has slumped in 2022, leading to fears of another "crypto winter." Several crypto and tech companies have quickly reversed hiring plans, while many, including leading exchange Coinbase, have laid off workers amid the slide in crypto prices and trading.
It has also led many in the industry to forecast that potentially thousands of digital tokens could collapse, a concern that only grew following the recent collapse of so-called algorithmic stablecoin terraUSD and its associated digital token luna. There are more than 19,000 cryptocurrencies in existence and dozens of blockchain platforms that exist, according to CNBC research.
The Terra issue showed "we're at the stage where basically there are far too many blockchains out there, too many tokens. And that's confusing users. And that's also bringing some risks for the users," Bertrand Perez, CEO of the Web3 Foundation, told CNBC at the World Economic Forum in Davos last month.
"Like at the beginning of the internet, you were having lots of dotcom companies and lots of them were scams, and were not bringing any value and all that got cleared. And now we have very useful and legit companies," Perez said.
Brooks said that it is worth noting that even amid the crash in prices, bitcoin has still outperformed the S&P 500 by 5x in the last 12 months, and that there isn't a session about "the future of U.S. equities" at the Aspen Ideas Festival. Bitcoin is down more than 56% year-to-date.
But even amid those sharp changes in valuation, the pricing of cryptocurrencies is "not that relevant any more than Google's volatility," he said.
"The value of these tokens you're getting is related to the adoption rate of the underlying [technology], that tens of millions of people are transacting bitcoin, the value of bitcoin goes way up," he said. "That is why bitcoin isn't going to stay at $20,000 because more and more people use it. Same with a lot of other things," Brooks said. "The value of the network is what drives the value of the token," he added.
Brooks, who signed the first regulatory guidance that defined what a stablecoin was and how it would be allowed inside the U.S. banking system, said that "stablecoins will become what people think of bank deposits today."
"These will be bank deposits that don't have a minimum balance fee, don't have a monthly maintenance fee, don't have a transaction fee," Brooks said, noting that he thinks stablecoins will have a significant impact for lower-income Americans as a result.
Disclosure: NBCUniversal News Group is the media partner of the Aspen Ideas Festival.