The rise in crypto prices cannot be caused solely by Trump’s bullishness, says veteran economist Judy Shelton.
“The whole decentralized finance movement reflects less trust in government money management,” Shelton said Tuesday at the Yahoo Finance Invest conference.
“I view it as a moral contract between citizens and the government that money serves as a meaningful unit of account and a reliable store of value,” Shelton added. “I think it is very healthy to challenge the protected status of the dollar as our legal tender by allowing continued innovation in alternative currencies.”
Her comments come as bitcoin prices have surged nearly $90,000 following Trump’s election victory, leaving crypto believers drooling over the potential for lighter regulation.
Shelton was an economic adviser to the first Trump transition team. In the past, she has been critical of government bureaucracy and the Federal Reserve’s power over the economy and asset markets.
To that end, Trump’s 2020 nomination of Shelton to the Fed stalled amid intense criticism from mostly left-wing lawmakers. Some found her economic ideas too extreme to be included in the Fed consensus.
That fear stems primarily from Shelton’s consistent support of the gold standard over the years.
Under such a system, a country’s currency is tied to the value of gold. The government sets a price for gold and buys and sells it at that price. The value of the country’s currency is then linked to this fixed price.
The gold standard came under fire during the Great Depression when people hoarded gold instead of storing it in banks during a financial crisis, the St. Louis Federal Reserve Bank explains. As a result, countries around the world ran out of gold. In effect, they were driven off the gold standard.
The US officially left the gold standard for domestic transactions in 1933 and halted international conversion of dollars to gold in 1971.
Today, the US uses a government-issued currency that is not backed by gold. Also known as fiat money, its value is derived from the fact that the government considers it an acceptable form of payment.
“I think a central bank digital currency would be a monopoly that would be terrible. But I do think we should continue to encourage this in the private sector. And I welcome the new Trump administration’s openness toward the cyber community and cryptocurrencies. Shelton said.
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Brian Sozzi is editor-in-chief of Yahoo Finance. Follow Sozzi on X @BrianSozzi and on LinkedIn. Tips about deals, mergers, activist situations or something else? Email brian.sozzi@yahoofinance.com.
