On Monday, Tesla and SpaceX CEO Elon Musk appeared on the Third Row Tesla Podcast to discuss a variety of topics regarding his past companies, current work, and thoughts on the future of technology. At one point in the conversation, Musk was asked for his thoughts on Bitcoin and other cryptocurrencies, a subject he has been known to tweet about somewhat frequently.
“I’m neither here nor there on Bitcoin,” said Musk in terms of his general thoughts on the financial technology.
Musk was then asked to share how he felt after he read Satoshi Nakamoto’s Bitcoin white paper for the first time, to which the Tesla CEO responded, “I thought it was pretty clever.”
While Musk sees value in Bitcoin as a tool for illegal transactions, he does not appear to be a fan of the “digital gold” thesis around the asset as a store of value.
Crypto is For Censorship Resistant Transactions
As Musk dove deeper into his general thoughts and feelings on Bitcoin, his general thesis on crypto became much clearer.
“This sort of gets the crypto people angry, but there are transactions that are not within the balance of the law,” said Musk. “And there are, obviously, many laws in different countries. And, normally, cash is used for these transactions. But, in order for illegal transactions to occur, cash must also be used for legal transactions. You need an illegal to legal bridge. That’s where crypto comes in.”
When asked if he was specifically referring to dark web activities, Musk responded, “It can’t be entirely dark because, otherwise, how do you buy normal stuff? And cash, these days, is used much rarer. It’s increasingly difficult to use cash. Some places, you can’t use cash at all. So, there’s a forcing function for transactions that are illegal, quasi-legal, and in some cases legal. But it’s got to have both legal and illegal.”
While Musk sees value in Bitcoin as a tool for payments that may not otherwise be allowed to occur, the Tesla CEO also sees a need for a bridge to exist between a crypto-driven black market and the legal economy.
Notably, a bill was introduced in Congress last week that could have a massive impact on the ability for Bitcoin to act as a legal, functional currency in the United States.
Bitcoin Won’t Be the Primary Financial Database
Although Musk sees utility in Bitcoin for its ability to enable more illegal transactions in a cashless society, he seemed to throw cold water on the idea that it will become some sort of global reserve currency of the world.
“Where I see crypto as is effectively a replacement for cash,” said Musk. “But not as a replacement for a primary — I do not see crypto being the primary database.”
Billionaire investor Ray Dalio also warned against the potential for Bitcoin to become a store of value (similar to gold) during an interview with CNBC earlier this week. That said, data from the second half of 2019 appears to indicate a growing view of Bitcoin as “digital gold” among market participants. This will be one of the key trends to watch for Bitcoin in 2020.
The expectation that more institutional investors will come into the market as Bitcoin heads into its third halving event is behind a variety of bullish predictions for the crypto asset in 2020. One industry executive has even predicted the Bitcoin price will reach $50,000 before the end of the year.
In his final comment on the topic of Bitcoin, Musk clarified that he does not have some sort of moral objection to crypto.
“This is sometimes taken as being like I’m being judgmental about crypto, but it’s actually — there are a lot of things that are illegal that shouldn’t be illegal,” explained Musk. “I think sometimes governments have too many laws. They shouldn’t have so many things that are illegal.”
It should be noted that Musk has been rather consistent with his views on Bitcoin over the years, as he shared similar thoughts on the topic as far back as 2014.