"You have to understand that the crypto ecosystem is well-suited for the dark side of finance," he told the Institute for New Economic Thinking.
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Though crypto markets are rebounding in the face of promising developments like the approval of the first US spot bitcoin ETF, the sector continues to suffer the same fundamental defects, famed short-seller Jim Chanos said.
In a new interview with the Institute for New Economic Thinking, the Chanos & Company founder laid out how the crypto sphere can be an avenue for financial fraud, challenges facing Tesla, and his views on the nascent artificial intelligence space.
Here are the legendary short-seller's best quotes from the interview:
Crypto and the dark side of finance
"You have to understand that the crypto ecosystem is well-suited for the dark side of finance for a lot of reasons. It's perfect for facilitating money laundering and illicit transactions. But also, there's the nature of the unregulated domiciles for a lot of this activity where someone can go to basically defraud customers, whether it's NFTs or ICOs or all the various types of digital flimflammery out there – it's perfect."
Bitcoin spot ETFs
In Chanos' view, recent efforts by investing giants to establish the first US bitcoin spot ETFs are another iteration of flimflammery, with the hope of profiting from crypto's high transaction fees.
"[Retail investors] think the asset price is going to go up. It's like a Nasdaq stock, not a currency. So they'll pay, and Wall Street wants the fees. The cost structure in crypto is quite high and so the fees are really high. You need retail investors because institutions aren't going to be paying 4% per round trip to buy and sell Bitcoin. Mom and Pop are, so Wall Street needs to keep the public interested in the crypto space."
Tesla's biggest challenges
"When you look at the actual numbers, which is what we do, it's a car company. [Elon Musk's] margins are car company margins, his returns are car company returns. That's the dichotomy: the challenge of running a real global auto company vs. the hype of going to Mars or selling you a robot to do your household chores."
Chanos also noted that the recent United Auto Workers strike against Tesla competitors didn't benefit the EV-manufacturer, even though it afforded pay increases to union workers.
"It's interesting, if you actually look at employment cost per vehicle, the good news is that based on the latest UAW contract, the hourly salary or wages per Tesla employee is about half the UAW, but this is the paradox: He has many more employees per vehicle produced than the American companies do. The American companies are actually more automated than Tesla. So the labor cost per vehicle isn't much different."
The price of AI
"Growth in the 10 years prior to the advent of the internet, 1989-1999, was higher than in 1999-2009. While the internet created a lot of businesses and wealth, it also destroyed a lot — creative destruction. Businesses we took for granted are no longer with us because of the digitization of products. I suspect AI will be similar."
Chanos offered an example: "When the AI hype got going in the spring, the IBM CEO said something to the effect of, well, we're looking at all of our employees to see if AI will make any of them redundant. I joked that they better hope their customers don't say the same thing. IBM is consulting! You have to think through all the iterations."
