0:00:01 – Announcer

You are listening to the National University Podcast.

0:00:10 – Kimberly King

Hello, I’m Kimberly King. Welcome to the National University Podcast, where we offer a holistic approach to student support, well-being and success – the whole human education. We put passion into practice by offering accessible, achievable higher education to lifelong learners. Today, we are discussing cryptocurrency. According to a recent article in Forbes magazine, cryptocurrency has gained popularity among investors globally. With technological involvement and industrialization, digital currencies are obtaining a satisfactory position over others, for example, bitcoin. By using cryptocurrency, it gets easier to transfer money without any involvement of banks and other financial institutions. On the flip side, cryptocurrency claims to be an anonymous form of transaction, but they are actually leaving a digital trail that the Federal Bureau of Investigation can decode. Some informative pros and cons coming up on today’s show. On today’s episode, we are discussing cryptocurrency and joining us as National University’s Dr. Riyad Abubaker.

Dr. Abubaker earned a bachelor’s degree in accounting and a master’s degree in economics from Versailles University in Palestine, in the Middle East, in 2007. He migrated to the US in 2008 and joined the University of California at Riverside in 2011. He earned another master’s degree and a PhD degree from UC Riverside in 2016. After his graduation, Dr. Abubaker worked for several institutions between 2016 and 2023. The American University of Kuwait, trinity College, the University of Hartford, the University of California at Riverside and National University. He serves now as a finance lead in the School of Business and Dissertation Chair for many PhD students. His focus of research is on macroeconomics, monetary policy and international trade. In his recent working in-progress research, Dr. Abubaker is investigating the asymmetric impact of the Federal Reserve’s policy of the economy during COVID-19 and the Russian-Ukraine War. Wow, we welcome you to the podcast, Dr. Abubaker. How are you?

0:02:30 – Dr. Riyad Abubaker

Very good. Thank you, Kim. Thank you for having me.

0:02:34 – Kimberly King

Yes, it’s great to talk to you again. Why don’t you fill our audience in a little bit on your mission and your work before we get to today’s show topic?

0:02:43 – Dr. Riyad Abubaker

Thank you, Kim. Basically, economics is a social science and we describe economics as the optimal allocation of scarce resources. This means that this major touches every one of us. As a child, you always have something limited in your bucket. I feel that I need to do something with the amount of money I have, with the amount of time I have, and I need to do that best optimal allocation.

When I started studying this major, I feel that this is a very important major, especially finance or economics, to each of us. It’s really a daily basis major that we need in order to understand things, how they work around us, how the economy works. What is the international conflict and how it’s related to the economics these days, what is the meaning of a scarcity of resources or limited resources? It is not- You don’t need to be basically in this major to apply economics or finance. That’s why, as a child, I was curious to study how things work, what are the preferences, how is microeconomic level works?

As a person who has background in math, I find that economics and finance in the world it’s a unique major that matches our social behavior with the mathematical and quantitative skills, which is very important, and it’s really something unique in my personality. Currently, for example, I’m looking at the things around the world that’s happening or in our local economy in a different view from just okay, where’s the economic concept here? I look at the housing prices, the inflation, the interest rate and the unemployment rate from different point of view. I feel this is something that I am passionate about. It is not just a major I study in textbook, it’s something that I apply in my daily basis.

0:05:01 – Kimberly King

Wow. I love that. I love that you are looking at it from a global perspective. I think that is just so important when we’re talking about finance and so interesting your perspective and your passion too. You can definitely see that. Let’s start off by talking about cryptocurrency, today’s subject matter. What is cryptocurrency, Dr.?

0:05:23 – Dr. Riyad Abubaker

Cryptocurrency, it’s really like- it’s the topic of all investors or humans these days. It’s something that everybody is searching for or invested in or curious about. Cryptocurrency basically is a digital currency. It’s based on network computer system. We don’t have it as physically currency that we know, that we learned and it’s something unique, something that has not been there before 2009. Now it’s like, especially after COVID-19, it became attracting several investors and several researchers because after COVID-19, people start working from home and they start thinking about other options other than the typical stock market that we know. They start investing in crypto big time. That’s why the market cap now currently is huge. It’s almost half of, let’s say, Apple market cap, which is around $1.4 trillion. Cryptocurrency basically has no physical location. It’s a digital currency. It’s based on computer network. As long as you have internet, imagine you have that money in your pocket or in your wallet.

0:06:39 – Kimberly King

Okay, right, right, okay. That’s an interesting way to describe that. Can crypto replace typical money, the old-fashioned way?

0:06:52 – Dr. Riyad Abubaker

Yes and no. So what do we mean by yes and no? We are almost there, but not yet. So the basic functions of money that we always teach our graduate or undergraduate students is that it has to do three main functions, the money. First, it can be used as a medium of exchange. Two, can be unit of account or can serve as a store of value. Now, what do we mean by this? Can we use a cryptocurrency to buy and sell goods and services? Yes, actually, a cryptocurrency has gained many attention for customers where they start using it. Some people were against it, like Chase Bank, and then they started again using cryptocurrency as a medium of exchange. So that target, I think, or function, is there. Now let’s think about the other function can be used as a store of value, which means can we transfer our wealth from the present to the future?

Now, here there’s a question mark because of the volatility of, and the high price volatility in cryptocurrency. That is a risk. You know. Investors cannot really rely on cryptocurrency because of the huge volatility. You know, if you look at the Bitcoin, Bitcoin started since $10 and jumped to $74,000, almost back down to $10,000, $16,000, then, as of today, almost $41,000. So that huge volatility creates basically an uncertainty for investors. So this is a question mark here.

Now, can it be used as a unit of account? Let’s say that’s a possible option, because you know we can measure things by. Let’s say, okay, this car worth, for example, one Bitcoin, that’s not a big deal, but again, the price volatility will stay there. So in order to use cryptocurrency completely as money, like the typical form of money, we need to achieve all these three functions. So that’s why we’re not there yet. But the cryptocurrency has gained attention and has also attracted investors and consumers, both in using these three functions. So any paper that does the three functions or serves these three functions, it could be called money, you know. So money is not really there’s no global definition of money but something that can serve as medium of exchange, store of value and a unit of account.

0:09:36 – Kimberly King

Okay, and so, with all that being said, what are the concerns of using cryptocurrency?

0:09:44 – Dr. Riyad Abubaker

That is a bigger question. Yes, thank you, Kim, for this question. So the biggest concern is the price volatility that we have seen. You know, for example, in 2020, in around February, when the COVID-19 spread a crypto, Bitcoin went down to from like $7,000, $9,000 to $3,800, which means three. You know $3,800 and jumped back, and you know, by Elon, when Elon Musk started talking about crypto and Dogecoin, it went up to $74,000 and back to $16,000 and then again come back to $41,000 two days ago for $3,000. So that’s that’s-

Price volatility is a risk. It’s something that investors and users don’t like to see. That is a very big risk. The other thing is hackers. You know many dollars, trillions of dollars, billions of dollars are lost due to hackers, and you know this is no. There’s no government control. As you can see, this is not a government issued currency. The government does not issue cryptocurrencies, so that’s why we don’t know where this money goes into circulation. And you know the FTX. You know the company that went viral about. You know. You know basically stealing. You know robbing off the system, so that is also another hackers. You know price volatility, tax issues you know. How the tax treatment for cryptocurrency also is still under investigation. So these are the risks that maybe many investors or users or customers are aware of.

0:11:36 – Kimberly King

So a question for you does blockchain technology make crypto safer?

0:11:43 – Dr. Riyad Abubaker

They’re trying to do it to make it safer. That is a true, but I mean to which level, you know. So there is more regulations toward currency, crypto currency, as you can see, these days. The SEC, you know that’s security and exchange commission is now involved in making sure that you know crypto is safer than before tax treatment, you know. It also becomes very important these days, you know, like, if you go back, for example, to XRP, XRP is a cryptocurrency that was issued, I think, in China and the SEC stopped it from trading in the US. So, yes, there are rules who make you know, make sure that crypto currency is safe, but currently it’s again, as long as too many people around the world are investing in a cryptocurrency, it has to go, you know, the right way. It has to be under, you know, control or kind of, let’s say, under monitoring, you know, by some government officials, by, you know, some government institutions, or something you know has force, you know, enforcement of these rules.

0:12:55 – Kimberly King

Okay, well, I know it’s still kind of the wild wild west a little bit, since it’s still sort of new, but is cryptocurrency, regulated then as a government type of money? I think you were just kind of touching on that a little bit.

0:13:10 – Dr. Riyad Abubaker

No, no, it’s not, it’s not really like. You know, if you go to the Federal Reserve, for example, which is the central bank of the US, the central bank is conducting monetary policy through controlling the money supply, which is the quantity of money and the interest rate. You know the price of money and you can see that the Federal Reserve is heavily involved in the money supply. But can the Fed control the crypto supply? No, so government? No, they have no control over crypto as much as everybody else. So, basically, what happens is all people who hold the crypto is controlling crypto, and this is there’s no like there’s no, you cannot say the US government is controlling crypto around the world.

You cannot say the UK government is controlling crypto around the world. It’s, basically, it’s controlled by everyone at the same time and that’s why government has no power over this. This is not government. It’s a global currency, kind of. You know, there’s no supply. The demand is global, the supply is global, but, for example, if you go to US dollars, no, the demand, the supply is local, but the demand is local and global. So there is control over the amount of money that goes, you know, in the economy, but there’s no control by government, by certain government, over the amount of a crypto that goes into the economy or goes into circulation.

0:14:42 – Kimberly King

And with that being said, then is crypto a safe investment for investors. So supply and demand, and then globally. I see that, so is it safe?

0:14:52 – Dr. Riyad Abubaker

As, as, let’s say, as of now, it’s not very safe. Now, is it going to be safe in the future? Maybe. There is more work needed here, you know, especially the hackers. You know the money that was stolen. That is a big issue. So, and the price volatility is the worst issue here. You know, like, for example, I don’t want to put my money in crypto and find out tomorrow that there is 50% drop in crypto, so that is a bigger problem versus buying, for example, US dollars.

Yeah, as of now, it’s not very safe, because you know of the price volatility and the tax issues and also, as we mentioned earlier, hackers who basically stole, you know, millions or billions of dollars from crypto.

So that’s why this is an issue, but maybe in the future it will reach, you know, safety. Yes, it could be, because currently, also, if you invest in other currency around the world, remember that they could change in any time, right? For example, if you go to any conflict areas, like, imagine, if you’re investing, let’s say, in Russian, European and I don’t know, guys, if you remember that the Russian currency went through huge volatility during, you know, the last two years because of the, you know, the Ukraine Russian war. So yeah, that is. You know, investing in basically any currency has risk. You know, buying any currency around the world has risk, but buying crypto it’s riskier because we still don’t know where this money goes and how it circulates, and that price volatility that we witnessed over the last few years, so that is scary, but maybe it’s going to be a very safe investment in the future.

0:16:41 – Kimberly King

Yes, yeah that price volatility is. It is scary and just the numbers that you just shared. Yeah, that’s so. Yeah, we probably just need to get a little bit more advanced with this. So who really controls cryptocurrency? I know it’s, you know we’re all in it together, but who controls it.

0:17:01 – Dr. Riyad Abubaker

No one, everyone at the same time, and that is supply and demand that goes into circulation. So basically no one, but everyone at the same time. So that’s the difference between this cryptocurrency and the typical traditional money that we know, which is controlled by the central bank or the Federal Reserve of the US.

0:17:23 – Kimberly King

Got it. Wow, this is such an interesting concept, especially coming from the old-fashioned way and then thinking about percentage rates and all of that. So taking the government out of this whole cryptocurrency stance, this is great. So we have to take a quick break, but more in just a moment. Stay with us, we will be right back.

And now back to our interview with Dr. Riyad Abubaker, and we’re talking about cryptocurrency It’s so interesting how we are really not there yet, and I do appreciate your honesty, Dr. How is cryptocurrency purchased?

0:18:04 – Dr. Riyad Abubaker

These days, you can buy crypto in many ways. You can go to Coinbase, many stock platforms like Robinhood, Webull, Fidelity, eTrade. Many actual platforms start using or selling and buying crypto. Especially, let’s say, in the past we started with Coinbase, for example, and Robinhood did not support the crypto, and then Robinhood changed and that’s why now you can see more platforms for trade. They’re accepting the trade of crypto and especially the most or safest crypto, and this is amazing. Like you can go, for example, to Coinbase. Not all cryptocurrencies can be purchased there and which shows, okay, why the other currencies are not there yet? You know they’re not sold or bought- Because, yes, the more you see there for sale or trade, which means I feel more comfortable, to be honest, buying those cryptocurrencies.

So that’s why there are thousands of cryptocurrencies these days, but you have to be sure where they’re available for purchase and what platform that supports the purchase of these cryptocurrencies, and again like Coinbase, is really well done. They did a very well done job in regard to this and they’re controlled kind of by the government in terms of taxes and other issues. So, again, Webull, Robinhood and other places you know to trade the crypto, so it is really easy to buy crypto these days, you know, investors have no issue with buying. But, again, if you want to look for certain currency that is unknown, you know, not familiar, it’s not known in the market, then you need to do more search and to finding a website or platform that supports the purchase or buying, you know, of these currencies.

0:20:11 – Kimberly King

That’s so interesting and even thinking about the whole development, who developed it, but also how it was developed… Bitcoin. Can you go into detail about that a little bit?

0:20:22 – Dr. Riyad Abubaker

Now this is like something I don’t know. I don’t know much the question because, honestly, until now, nobody knows exactly the name of the person who created the crypto. For example, there was a name, you know a proposed name it’s Satoshi Nakamoto, from Japan, and this is that’s not the real name of the person who created currency. For example, they said that a person named the Great White is the person who created Bitcoin, but again, is that 100% true? So there’s kind of questions about who is the original person that created the cryptocurrency and I’m not too sure why these information is not 100% accurate and available, and why they have to go with different names rather than the accurate, real name. So that basically, could create a question mark. Again, about the crypto and how it’s created, where it’s created and who created it.

0:21:23 – Kimberly King

Okay, interesting and it’s funny. I mean, I guess, yeah, for security purposes it’s real name or real person may be interesting. Which crypto can we trust and why should we trust Bitcoin?

0:21:40 – Dr. Riyad Abubaker

I do believe Bitcoin, you know. I do believe that Bitcoin actually is the most trusted cryptocurrency. Because I mean, for me, when I want to invest, let’s say, in crypto, I look at the market cap and if you look at Bitcoin, Bitcoin almost have half of the market cap of a cryptocurrency. It’s like 0.7 trillion dollars compared to 1.4 trillion dollars in the markets. So, as long as the company is huge and big, you know, this is how that the basic investment principles. When we invest in Google, we trust Google more than investing in biocompany that has a small cap with 5 million dollars, let’s say, definitely we trust Apple more than what we say usually. Apple is too big to fail. You know that is, oh, this company is too big to fail. It’s just impossible for this company to fail and to get out of the market or get delisted from the NASDAQ or something so on and so forth.

Same thing applied to the cryptocurrency. In my belief, that if you go to the higher market cap, then you’re in safer hands, which, in my perspective, that crypto, Bitcoin specifically is the crypto that has that feature, the highest market cap. So most investors are already taking, going toward Bitcoin. For example, if you go to Dogecoin. Dogecoin is, let’s say, very volatile and very risky, and it’s always. It goes up and down, based on some comments from Elon Musk and so on and so forth. So, or like a tweet from you know, like big investors, and so on and so forth. So that’s why Bitcoin is kind of more stable, let’s say, in relative to other cryptocurrencies.

0:23:37 – Kimberly King

Okay, interesting. How many cryptocurrencies are out there? Is that even known?

0:23:44 – Dr. Riyad Abubaker

I was shocked when I saw these numbers in the past, but I do believe currently almost 23,000 cryptocurrencies, which is a huge number…

0:23:55 – Kimberly King

Are you kidding me?

0:23:57 – Dr. Riyad Abubaker

Yes really. Yes, I was shocked from this number. Yeah, if even I want to be accurate, let’s say 22,932, which is around 23,000 cryptocurrency. In the past I was thinking okay, there’s-

0:24:19 – Kimberly King

That’s shocking. I was like- wow, 23,000? That’s crazy.

0:24:24 – Dr. Riyad Abubaker

Yes, that is true. I mean in the past I was thinking no way. When I look at these numbers I thought, okay, you know we have, let’s look. Okay, we have XRP we have Bitcoin.

We have, let’s say, bitcoin, bitcoin, bitcoin. Okay, how many other cryptocurrencies we have? Let’s say 20, but no, actually there is almost 23,000 cryptocurrencies, which is a huge number, because now, you know, too many companies are creating their own cryptocurrency, for example, Facebook. You know, two years ago they proposed a cryptocurrency I think they wanted to call it Lapra, but it did not go to the market, you know, for some regulations and other stuff. But yeah, there is a huge number of crypto out there.

0:25:19 – Kimberly King

And it does kind of beg the whole question about what is regulated. I mean that is frightening. And then you think about how much regular, old-fashioned currency is compared to that number. So that’s wow, that’s fascinating. That blew my mind away there. So let’s talk about those regulations and requirements that govern Bitcoin. What does that look like?

0:25:44 – Dr. Riyad Abubaker

In terms of taxes. You know taxes represent a big issue when it comes to regulating the cryptocurrency. You know you could make, let’s say, millions of dollars, but where this money goes, you know, and do you pay taxes on this money? That’s a big issue, especially, you know, for this is a global investment. This is kind of dealing with investment that goes around the world. You know it’s not just domestic investment. So it’s the tax issue is a big issue here. You know, and that’s why you know, many governments ban it. They don’t know how to deal with the cryptocurrency Something out of their control, something out of their hand.

So that is one regulation. Regulating the supply and the demand and the flow of money. So, and will that impact the prices? For example, look at the Federal Reserve, when inflation was high and reached 10%, which is the highest in 40 years. Okay, there’s a simple way to deal with this let’s cut the money supply, let’s increase the interest rate right and let’s basically sell government bonds so we can collect the money from the hands of the households or people, or companies and firms. But how do we do? How do we do the same thing when there is a flow of money that’s called the cryptocurrency?

It’s out of their control, right, and that could cause, you know, if people are getting too much money, that means they could increase the prices back. So can you control inflation when there is a huge investment or a huge supply of cryptocurrency, you know? So you don’t own the dollars anymore as a Federal Reserve or central bank, so that is a big issue, you know. But again, the US government worked on this very big time and currently I think there is even a state regulation. Like for each state, there is certain rules and regulations when it comes to treating the cryptocurrency.

0:27:48 – Kimberly King

Okay, yeah, boy, I know what could go wrong, right?

0:27:52 – Dr. Riyad Abubaker

Yes, it’s crazy.

0:27:55 – Kimberly King

Can stores and retailers accept cryptocurrencies such as Bitcoin?

0:28:00 – Dr. Riyad Abubaker

Yes, but not there yet. So in the past, in the past, the number of you know companies or stores who accepted the crypto was very much limited. You know you could really search and ask okay, who accepted crypto? Especially, for example, let’s say, Tesla. I remember when Elon Musk, you know, at one of the international conferences, mentioned that Tesla does not accept Bitcoin and that was a big shock for investors because same person, which is Elon Musk, who was talking about you know, Dogecoin and trying to get investors to buy Dogecoins. So, yes, many companies did not accept the crypto in the past, like, for example, Chase Bank was against the crypto and then they changed.

Currently, let’s say, give one example of people who accept the crypto. I think AMC, you know the theater company I do believe they accept the crypto. I do have a list of many stores that start accepting crypto. For example, one of them, like MovieTickets, AMC, AT&T, you know a flight, like CheaperFlight, Dish and other companies. But, again, can you stop by Walmart and buy, you know, at the grocery store and when you finish, and you know you want to pay, can you pay by crypto and use? Okay, here’s my tab, you know. Here’s my computer, my smart phone. Okay, I bid by you know. Oh, wow, it was expensive. You know 0.001 of the Bitcoin I bid in the store. So that’s not there yet, right as you can see, but maybe, maybe one day, if crypto gain more attention and more investment and more regulations, it could serve, and serves, the three functions of money. Then it could be widely used more than now.

0:30:01 – Kimberly King

Wow, this has been so interesting. Are there any other things we should know about cryptocurrency before we wrap today?

0:30:11 – Dr. Riyad Abubaker

Crypto is a really interesting issue, especially in these days. How can you work with the crypto if you don’t have internet, if you don’t have a smartphone? So definitely, crypto is like a digital money that works as or serves the current state of the world, the state of the technology, the state of the art. It really moves like we move the money from the traditional money to the technology-based money, if you look at it. So how would it be for people who still don’t use the internet, don’t use computers, don’t have laptops, don’t have smartphones? So if a crypto replaces money and it becomes very much used, then some people will be left behind. So that’s why it’s a complicated topic.

Now, again, the hackers. It could be hacked. But again, also, we know that banks could be hacked, right. We know that many hackers could go into the system and play with numbers, change numbers in banks. And same thing, because when we say I have, if I say I have $10,000 in a bank, it’s a number, right. I don’t really have those money as cash in a bucket. You know, most likely I have them as numbers. You know somebody plays with the number that is similar to somebody plays with the cryptocurrency out there, right? So same story, you know. Hackers could be everywhere. You know.

0:31:51 – Kimberly King

No, that’s a good point, though, too. I mean, it’s happening with our banks as well. So that is, I don’t know I think it still is a lot of little ways to go for me personally to feel secure, but this has been so interesting to hear where we’re at and what the future looks like.

0:32:11 – Dr. Riyad Abubaker

Yeah, and another also point I wanted to add is – we look at the cryptocurrency these days as investments and I’m sure, like most people, when the word crypto comes to their mind okay, can I buy Bitcoin? And is it true that the Bitcoin price will jump to $1 million each point? You know, that is a lot right. These predictions, you know, were stated a long time ago and people start okay, let me buy more, let me get into this market, but do people think about crypto as a medium of exchange, not a store of value? That’s unlikely. I mean, I don’t really think like you know, on a daily basis. You know what, if I have the crypto, it would be easier for me to buy my shoes today, rather having the secret card. No, I don’t really think that way, you see. So that’s most of the people thinking these days it’s an investment rather than it’s a medium of exchange.

Now, if people start thinking that, what is the advantage of a crypto over typical money you know, sometimes we call it fiat money or government money- what is the advantage that crypto has over fiat money in terms of medium of exchange? Now, if we go back, like years ago, you know where we don’t have the tap. You know, these days we have a credit card or we tap it. You know we don’t really put the card in the machine. We have a phone, you know, with Apple Pay or anything, just okay, we scan our phone quickly, right. So with this technology, we improved from having these cash dollars that we have to pay right. And now, if we did not really have this technology and we jumped straight to crypto, we will say, wow, that is something new. But is there advantage of a cryptocurrency over the new technological pace, a medium of exchange techniques, kind of? That is something we have to look at. You know the pros and cons like, okay, I can tap my phone or where my bank account is charged and I can tap my phone where my wallet of digital currency is charged. How do I see big difference here? You know, is it easier to carry the money? You know, in terms of a cryptocurrency versus cash, versus credit card and debit card or phone, there’s not big difference between the other two, which means crypto versus, let’s say, digital wallet that you have when you scan your you know, Apple phone. There’s no big difference, let’s say. But there is a difference between crypto versus cash or dollars. So, if there is a real advantage of that using a crypto over this digital wallet that we have Apple phone or credit card or tab in your phone then I would say we will think of more of cryptocurrency as a medium exchange.

But currently that is that’s not the case. I really don’t see people say, oh, crypto is more convenient to use it here at the store, you know. So mostly people think of crypto as an investment opportunity, which is like those people you know who really trade currency buying and selling. You know these always out there, you know, in many places around the world. You buy, you ask, you sell, you ask you buy. You know you’re a euro, you sell euro and kind of you make money out of buying and selling. So that is what the crypto represents these days, more than a medium of exchange. And is it, like you know, a safe as a store of value? That is, you know, the big issue here.

0:36:12 – Kimberly King

It sounds like it so well. This has been so interesting, doctor. Thank you so much for your time, doctor, and if you want more information, you can visit National University’s website at NU.edu. And thank you so much for your time today.

0:36:26 – Dr. Riyad Abubaker

My pleasure, Kim. Thank you.

0:36:31 – Kimberly King

You’ve been listening to the National University podcast. For updates on future or past guests, visit us at NU.edu. You can also follow us on social media. Thanks for listening.