Following Donald Trump’s sudden and mysterious tweets regarding bitcoin last week, Treasury Secretary Steven Mnuchin held an unexpected press conference on Monday. He used coded language telegraphing the end of bitcoin and cryptocurrency.
Steven Mnuchin was not lying when he said that the federal government wants to crack down and stop any criminal activity that uses cryptocurrencies for payment.
That’s a high priority for the federal government, especially as it relates to terrorism, the drug trade, and money laundering.
The United States also wants stable financial markets, preferably ones that go up over the long term.
Various sources put the total value of all bitcoin in the world at $41 billion. While that is a rounding error in the $84 trillion global economy, it still represents $41 billion that is not invested in more traditional and safer securities.
The speculation of bitcoin could lead to an increasing frenzy. And when that market crashes – which it will – that means a lot of people are going to lose a lot of money.
Who are those people going to complain to? The federal government. They don’t want to be the fall guy and be accused of not regulating what turned out to be a dangerous scam.
There’s another reason the federal government wants to put the kibosh on bitcoin.
Steven Mnuchin said during the press conference that the government will not permit anything to threaten the U.S. dollar as the world reserve currency.
If people turn to bitcoin en masse, especially since it has no real value, that could destabilize the world markets.
The federal government will essentially choke off cryptocurrencies and bitcoin by using government regulations.
In both his statement and during the Q&A session, Steven Mnuchin repeatedly said that Facebook and other cryptocurrencies are going to have to meet all the banking regulations that every other financial instrument is required to comply with in the United States.
That means meeting FinCEN’s rules, the Treasury’s criminal regulatory framework.
These regulations are so complex, so onerous, and littered with minutia, that they require highly paid compliance officers that every financial institution hires.
Regulatory compliance is enormously expensive and time-consuming. It takes years just to set up the regulatory framework, years to interpret that framework, and years worth of work in order for compliance to be achieved.
That’s what will kill bitcoin and cryptocurrencies.
Bitcoin and cryptocurrency transmitters don’t have nearly enough money or expertise in order to meet the regulatory guidelines that will be enforced.
We’ve seen this before.
In 2011, the online poker world was rocked when the DOJ indicted executives of the biggest poker sites, seized the websites and froze player accounts. It also turned out Full Tilt Poker was a Ponzi scheme in which only $60 million was available yet players had $390 million owed to them.
Barack Obama’s administration hated payday lenders, gun dealers, and pornography operators. So they attempted to shut those businesses down by choking off their access to the financial system. The FDIC threatened banks with fines and litigation unless they refused their business, while ACH houses that facilitated online payday loan transfers were shut down.
Make no mistake. The federal government wants bitcoin and other cryptocurrencies dead.
They will choke the life out of them through regulation.
Naturally, foolish bitcoin traders rushed into bitcoin and sent its value higher because they don’t really understand what Steven Mnuchin said. Now they do.
Last modified: July 16, 2019 12:08 UTC