Over the past year, Bitcoin and other cryptocurrencies have increasingly found their way into the mainstream news cycle. Those stories have sometimes been positive, such as when Overstock elected to accept Bitcoin payments and when the Dogecoin community pooled their resources to sponsor a “Dogecar” in the Talledega NASCAR race. However, with increased exposure comes increased criticism, and the cryptocurrency community experienced several setbacks as prominent exchanges and wallets such as Mt. Gox, DogeVault, and Cryptorush have shut down, losing thousands of dollars–and in Mt. Gox’s case even hundreds of millions–that people had stored in their online wallets.
In response to media exposure surrounding these debacles, a variety of government agencies have begun to voice warnings about Bitcoin, cautioning residents of their state to stay away from investing in cryptocurrency.
[dropcap size=small]I[/dropcap]ndiana Secretary of State Connie Lawson issued a Bitcoin-related bulletin titled “Are You an Informed Investor” through the official Indiana state government website. Secretary Lawson is not the first United States government official to respond negatively to cryptocurrency. Over the past several months, a number of states, including Massachusetts, Florida, and Wisconsin, have declared cryptocurrency to be a volatile investment that carries an unusually high risk compared to more traditional investments.
Lawson’s Bitcoin warning echoes many of those concerns, and the state of Indiana appears particularly concerned about one of cryptocurrency’s strongest selling points–its lack of government oversight and regulation. The bulletin warns Bitcoin investors who live in Indiana that “virtual currency is subject to minimal regulation” and that there “may be no recourse should the virtual currency disappear,” since virtual currency deposits are not insured by the FDIC.
Channeling fears about another exchange folding like Mt. Gox did, Lawson posits that “unregulated companies that may lack
appropriate internal controls and may be more susceptible to fraud and theft than regulated financial institutions.” Confirming that Lawson would prefer her state’s residents not seek to use cryptocurrency, she encourages readers to “learn more about virtual currency” by reading such clearly-biased articles as “Bitcoin: More than a Bit Risky,” published by the FINRA, and “Ponzi Schemes Using Virtual Currency,” written by the Securities and Exchange Commission.
Lawson puts forward some valid warnings about Bitcoin. Investors should be careful about where they invest their money. Every investment has risks, even cryptocurrency. As with any investment, someone looking to add cryptocurrency to their investment portfolio should carefully consider investments before pulling the trigger, and investors should be careful about where they store their money.
However, the government pushback against Bitcoin has been decidedly disproportional. Government agencies do not issue warnings about the dangers of mutual funds or U.S. Treasury bonds, for example. Additionally, fiat currency suffers from many of the same pitfalls of cryptocurrency, including the danger of theft and the risk of an economic crash and a subsequent devaluing of the currency. Moreover, government officials often highlight that thieves and other nefarious types use Bitcoin as a means to conduct criminal activities anonymously, particularly illegal drug trafficking. Senator Joe Manchin of West Virginia called for the U.S. government to ban Bitcoin for these very reasons. However, as Senator Jared Polis revealed in a genius satirical response, U.S. dollars have been found at the scene of nearly every major drug bust throughout the world.
As cryptocurrency gains popularity, its supporters should expect to see pushback from government officials such as Connie Lawson and Joe Manchin. Though it can be frustrating to know that the general public is only getting one side of the story when governments issue news bulletins about Bitcoin, the cryptocurrency community should remember that the reason governments are so pessimistic about cryptocurrency is because they fear its ability to supplant national fiat currencies.
Last modified (UTC): May 14, 2014 07:39