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Bitcoin ‘Doesn’t Pass the Smell Test’: Massachusetts Securities Regulator

Josiah Wilmoth
Last Updated March 4, 2021 5:03 PM

Massachusetts’ top securities regulator cautioned investors against purchasing bitcoin, claiming that it “doesn’t pass the smell test.”

Bitcoin ‘Doesn’t Pass the Smell Test’

Speaking with CNBC , William Galvin, the secretary of the Commonwealth of Massachusetts, said that the dramatic rise of the bitcoin price was based entirely on speculation, not real fundamentals.

“There is no product here. This is entirely speculation. That’s already been proven by the wild gyrations of the value,” Galvin said. “It’s also subject to manipulation, because no one can explain, it no one can control it.”

‘It doesn’t pass the smell test,” he added.

Galvin, who also served as a Massachusetts state representative for 15 years, said that bitcoin “certainly qualifies as a bubble,” noting that public companies have artificially inflated their stock prices by simply adding “blockchain” to their names.

“There is no ‘there’ there,” he continued, expressing concern that average investors were getting caught up in the bitcoin “mania” without possessing a true understanding of either the asset or the risks associated with purchasing it.

“This is clearly a bubble,” he concluded.

Nevertheless, Galvin acknowledged that because bitcoin is “allegedly a currency” he does not have direct jurisdiction over the asset itself.

Rather, he said that his office is investigating initial coin offerings (ICOs) and other cryptocurrency-derived investment products which he says likely fall subject to securities regulations.

The U.S. Securities and Exchange Commission (SEC) agrees. SEC Chairman Jay Clayton recently issued a personal statement in which he said that most of the ICOs he had observed were securities offerings — not utility token generation events (TGEs).

Bitcoin Potentially ‘Worthless’

Galvin’s comments reinforced a public statement (PDF ) his office had issued earlier this month in which he suggested that bitcoin was was potentially worthless and cautioned Massachusetts residents against investing in it.

“Bitcoin is just the latest in a history of speculative bubbles that most often burst, leaving the average investors with a worthless product,” he said in the statement, referencing the oft-lobbed but dubious tulipmania comparison.

Galvin went on to list seven reasons why investors should be cautious to invest in bitcoin, beginning with the fact that it is “not backed by the United States or any other government or central bank.”

Of course, as most cryptocurrency investors would retort: that’s a feature — not a bug.

Write to Josiah Wilmoth at josiah.wilmoth(at)CCN.com.

Featured image from YouTube/Mass Dems.