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U.S. Treasury Fires A Missile At Cryptocurrencies; China Bans Them Again

By Andy HechtCryptocurrencySep 27, 2021 06:29AM ET
www.investing.com/analysis/us-treasury-fires-a-missile-at-cryptocurrencies-china-bans-them-again-200603148
U.S. Treasury Fires A Missile At Cryptocurrencies; China Bans Them Again
By Andy Hecht   |  Sep 27, 2021 06:29AM ET
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This article was written exclusively for Investing.com.

  • Governments may love blockchain, but they hate cryptos
  • Sanctions for an exchange: aiding and abetting cyberattacks
  • A smokescreen to protect control—China bans the asset class, again
  • The SEC fired a missile at Coinbase
  • More regulatory attacks aimed at slaying the beast that threatens status quo

Cryptocurrencies are becoming mainstream assets. More and more companies are accepting them for payment, financial institutions have started allowing some percentage of digital currencies for portfolio allocation, and one Central American government has adopted the leading crypto as its national currency.

Proponents claim the crypto revolution is the evolution of fintech. Opponents say digital currencies have zero intrinsic value and are most useful for those looking to break the rules, regulations, and laws. Warren Buffett has called Bitcoin and peer cryptocurrencies “a worthless delusion,” “financial rat poison squared,” and has said that they “basically have no value.”

His partner, Charlie Munger, went even further, saying Bitcoin and other cryptos are “disgusting and contrary to the interests of civilization.”

Conversely, Jack Dorsey, co-founder of Twitter (NYSE:TWTR) and CEO of Square (NYSE:SQ), called them the currency of the internet. In an ironically witty comment, Tesla's (NASDAQ:TSLA) Elon Musk revealed his feelings about cryptos when he said:

I might pump, but I don’t dump the assets.”

While support or resistance to cryptocurrencies could be generational, the conflict transcends the high-profile comments supporting or rejecting the asset class.

Control of the money supply is a core component of the government’s power. The cryptocurrency asset class’s ideology is libertarian and runs contrary to the financial status quo. Cryptos hand the control from governments back to a collective marketplace composed of individuals. If cryptos replaced fiat currencies, governments could not expand or contract the money supply to expand or contract growth, a substantial power and control tool.

We have seen the government and regulatory agencies fire some missiles at the asset class over the past weeks. This could be just a beginning to prevent the asset class from growing past its current $2 trillion market cap.

Governments may love blockchain, but they hate cryptos

There is almost unanimous support for blockchain technology as fintech offers speed and efficiency for settling transactions. Blockchain is either Bitcoin’s child or vice versa, which is the chicken-and-egg dilemma of the cryptocurrency asset class.

Many well-meaning systems and businesses can spawn controversial or even evil consequences. The pharmaceutical industry saves lives but abuses and drug addiction have also cost lives.

Governments have embraced blockchain technology, but cryptocurrencies are another story.

One of the roots of political power comes from controlling purse strings. The ability to expand and contract the money supply is a critical governmental function. The current stimulus that has stabilized the US and global economy during the worldwide pandemic is a perfect example.

Cryptocurrencies are libertarian assets as they remove the control of the money supply from governments. The value of a cryptocurrency is a function of the bids and offers in the market at any time.

Most cryptos have fixed supplies. They fly beneath the radar of governments, monetary authorities, and central banks. The rise of the cryptocurrency asset class is a direct ideological challenge to government control and power. Therefore, while governments may support blockchain, cryptos are a completely different story.

Sanctions for an exchange: aiding and abetting cyberattacks

Alarm bells in the halls of power worldwide likely went off when El Salvador adopted Bitcoin as its national currency in early September. Last week, the US Treasury sanctioned a cryptocurrency exchange for its role in laundering ransoms for cyberattacks.

The Treasury alleges that the “Suex” exchange facilitated transactions involving illicit proceeds from at least eight ransomware variants. We will likely see government lawyers use “know your customer” rules and regulations to sanction the exchange.

As many opponents point out, cryptos are the perfect currencies for nefarious and criminal endeavors. Charlie Munger called them “disgusting.” While the Treasury has gone after an exchange for logical abuses, the ideological reason for roadblocks is also compelling.

A smokescreen to protect control—China bans the asset class, again

I view the increasing number of regulatory actions against the cryptocurrency asset class as a coordinated attempt to preserve the status quo. It is easier to put a regulatory leash on cryptos before the overall market cap—and acceptance as a mainstream means of exchange—grows. The escalating number of sanctions and regulatory actions are nothing more than a smokescreen to maintain the status quo. If digital currencies dominate the markets over the coming years, governments will make sure they dominate the cryptocurrencies available for trading and investment.

The bottom line is that the US, Europe, and all other governments will do everything to keep control of the money supply. Hedge fund manager Ray Dalio recently said, if Bitcoin becomes really successful, regulators will “kill it.”

On Sept. 24, in another governmental move against the asset class, China declared all cryptocurrency transactions illegal.

The SEC fired a missile at Coinbase

The US Treasury’s latest move is the second regulatory missile over the past weeks. The SEC sent Coinbase Global (NASDAQ:COIN) a Wells notice informing the US-based crypto exchange it intends to bring an enforcement action to prevent the rollout of COIN’s “Lend” product that allows customers to lend crypto tokens for a fee or yield.

The SEC argues that “Lend” securitizes cryptos which put them under the agency’s regulatory umbrella. COIN canceled its plans for the product after receiving the notice.

Gary Gensler is the SEC Chairman. As the head of the CFTC, he allowed Bitcoin futures contracts to trade on the CME. During his hiatus from service at US regulatory agencies, Chairman Gensler taught a fintech course at MIT. Many cryptocurrency market participants believed he would support the asset class at the SEC.

Last week, the SEC Chairman said he doesn’t see much long-term viability for cryptocurrencies, comparing them to the wild-cat banking era in the US which occurred from 1837-1863 in the absence of federal bank regulation.

More regulatory attacks aimed at slaying the beast threatening status quo

El Salvador is a lone wolf, adopting crypto as its national currency. Meanwhile, China has made them illegal, with severe penalties for those that defy the law.

The US is using the Treasury, SEC, and other regulatory agencies to “protect” investors and businesses, but the goal is to protect the government’s control of the money supply.

I expect the number of regulatory actions and anti-crypto statements to grow with the asset class’s market cap. Ray Dalio said it best as the governments can “kill” Bitcoin and the other cryptocurrencies.

The number of regulatory missiles is likely to keep coming. The problem is the ideology, which runs contrary to the status quo and government power. When fully regulated, cryptos will no longer return the power of money control to individuals, which is the attraction for many devotees.

U.S. Treasury Fires A Missile At Cryptocurrencies; China Bans Them Again
 

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U.S. Treasury Fires A Missile At Cryptocurrencies; China Bans Them Again

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Comments (30)
Gino Bossi
Gino Bossi Sep 30, 2021 7:54AM ET
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The only difference between cripto currencies, and Fiat money, is that central banks, or the federal reserve can´t control them, nor create more of them. So they will never lose through the years as your beloved dollars do
Gino Bossi
Gino Bossi Sep 30, 2021 7:52AM ET
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The only difference between cryptos and FIAT is that the federal reserve can´t print them
Horyu Ken
Horyu Ken Sep 29, 2021 3:26AM ET
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its good to have a few assortments of money baskets in each type of yeah.
Rodney Dangerfield
Rodney Dangerfield Sep 28, 2021 11:55PM ET
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why does everyone think it's a good idea to let go of our physical money and use cryptocurrency when history looks back at our time you guys may be a running joke... they'll say these people gave their physical money away and put their trust in an imaginary currency I'm pretty sure you'll be a punchline to a joke
Rodney Dangerfield
Rodney Dangerfield Sep 28, 2021 9:12PM ET
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I don't know about the rest of you but I can't wait for every single transaction to be tracked guess I won't be stuffing cash under the mattress anymore gee I wonder how long it will take before I get screwed with that currency too.... wait a minute that's the whole point
Horyu Ken
Horyu Ken Sep 28, 2021 9:12PM ET
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There goes the days of burying money underground in a glass jar
Ron Love
Ron Love Sep 28, 2021 4:49PM ET
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Govts cannot stand the idea of people having a non-fiat currency
Randall Paul
Randall Paul Sep 28, 2021 6:55AM ET
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I'm waitng for a government federal wallet.
Vv Pp
Vv Pp Sep 27, 2021 3:30PM ET
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cryptos are inevitable
frendy glasser
dejong099 Sep 27, 2021 2:47PM ET
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other great quotes from history: I think there is a word market for maybe 5 computers.  Watson, President of IBM 1943.  There is no reason anyone would want a computer in their home.  Olsen, founder of Digital Equipment Corporation 1977.
Vicken Eskidjian
Vicken Eskidjian Sep 27, 2021 1:33PM ET
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Goverments will *******even its people for control and power.
jason xx
jason xx Sep 27, 2021 1:07PM ET
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misleading headline, Coinbase is not "crypto"...
Ravi Karuppiah
Ravi Karuppiah Sep 27, 2021 12:22PM ET
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Government's first job is to maintain order. Cryptos will bring too much chaos into the system and its government duty to ****it before it becomes much bigger.. there is always stock market to make money.. and all crypto companies can list themselves in stock market.. they don't need to create their own coin and a closed system which undermines the overall stability of the system..
Jason Barnes
Jason Barnes Sep 27, 2021 12:19PM ET
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The value of the “Green-back” and digital coins are only what people believe they are. You can loose money either way… Fiat through inflation with money printing. Digital crypto through price when trading. They are no different! The govt isnt “protecting investors” from anything. They just fear that the people will put more faith in crypto and will loose faith in their fiat dollar, therefore they will loose their control over the people. The US govt is so insecure!!
John Healy
John Healy Sep 27, 2021 12:19PM ET
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Agreed. The government hates competition and they’ll regulate it until it becomes a non-threat. I see a Fereral Reserve that’s against the ropes getting the daylights knocked out of it while maintaing an unimaginable level of denial. This can’t end well.
Steven Angelo
Steven Angelo Sep 27, 2021 12:14PM ET
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People like Ray Dalio put out FUD while they own BTC and continue buying more at lower prices that folliw their FUD machine. BTC has hit an inflection point globally and no group of govts can ban it.
John Healy
John Healy Sep 27, 2021 12:14PM ET
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They can ban it, but even if they don’t they’ll regulate it. The government hates cash, bitcoin, precious metals or anything else that competes with their fake currency.
Javi MV
Javi MV Sep 27, 2021 12:11PM ET
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U promote cryps with some libertarian non sense arguments and by doing thay u make ppl lose money - what a feeling right?
Tobias Mueller
Tobias Mueller Sep 27, 2021 12:07PM ET
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Oh gosh, China… here we go again. 🙄
Ryan Morton
Ryan Morton Sep 27, 2021 12:06PM ET
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old news travels fast
Daniel Esomonu
Daniel Esomonu Sep 27, 2021 12:03PM ET
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Johnny Ancich
Johnny Ancich Sep 27, 2021 12:02PM ET
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If "digital currencies have zero intrinsic value", so does FIAT.
PUBG LOVER
PUBG LOVER Sep 27, 2021 12:01PM ET
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This article neglects the favt that their is an open public ledger… more crimes are committed using fiat cash than btc… so you either lie… or fail to do your research… this is about control… inflation as a tax… and our elite ruling class in the fovernment and fed deciding what the value of our dollar should be… ill opt for the members of the crypto community to decide the value of a btc rather than some jackholes at the fed
Sidney Glover
Sidney Glover Sep 27, 2021 11:09AM ET
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Andy, you are perpetuating myths about these game tokens. I wonder how much you are getting paid to lie? coins are controlled by a few people who start them. companies are accepting them to market themselves nothing more the people pushing the coins are wishful thinking. there is no connection between fiat currency except to exchange the coins back to realitythe me too movement is evident along with FEAR OF MISDING OUT. investment. com needs to stop publishing your misleading pieces. scammers and hackers love this nonsense
James Pattison
James Pattison Sep 27, 2021 9:44AM ET
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This article neglects the favt that their is an open public ledger… more crimes are committed using fiat cash than btc… so you either lie… or fail to do your research… this is about control… inflation as a tax… and our elite ruling class in the fovernment and fed deciding what the value of our dollar should be… ill opt for the members of the crypto community to decide the value of a btc rather than some jackholes at the fed
Imre Magossy
Imre Magossy Sep 27, 2021 9:04AM ET
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Yes Crypto makes fake dollar and lot Will cause inflation and the too much or already caused it. Which is the thyme eggs? Bitcoin/Ford/Apple/Nvidia. Help: search the product. Crypto is a game what pulled into the real world and poised it. Crypto currency is used now not for the people but instead back to slavery the planet.
James Pattison
James Pattison Sep 27, 2021 9:04AM ET
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You dont understand crypto
Nick Farr
Nick Farr Sep 27, 2021 8:31AM ET
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Fiat bans crypto. Crypto undermines Fiat. Crypto wins over. Black swan event demolishes internet. Crypto currency is backed by nothing so all is lost. Bless. once it's mainstream that fiat currencies have printed themselves out of value so to speak the remaining options are crypto and precious metals. Mess with the power supply and crypto soon loses its glamour. BTC is backed by ZIP all.Gold may be inconveniently heavy and old fashioned, but can you touch crypto, is it lusterus and beautiful? No you can't and it's not. I'd rather be holding metals when all the lights are turned off. Not clutching algorithms.
Amie Inconnue
Amie Inconnue Sep 27, 2021 8:31AM ET
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Fiat currencies were printed out of value many times in different countries (just look at Germany in 1920th, etc.), governments simply erase a few zeros on bills and continue. A complete internet failure (unlikely) would erase not only cryptos: how about electronically-backed fiat currency accounts? Agree about gold however.
Johnny Ancich
Johnny Ancich Sep 27, 2021 8:31AM ET
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If the internet were somehow demolished (emp pulse), you would have much, much bigger problems that arguing over what is money and what backs what.
my name
my name Sep 27, 2021 8:22AM ET
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hmmm... strange thing: why do governments like paper money if ALL crimes are paid using paper money!
 
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