Hey, I normally post on Fridays but I saw the cryptosphere getting a little out of sorts about U.S. Treasury Secretary Steve Mnuchin’s press conference about bitcoin and Facebook’s Libra cryptocurrency. I feel compelled to address this. Excuse the typos and possible bad syntax, I’ll clean it up later when I have time.
I missed the press conference (damn day job!) but I caught some recaps.
Seems like Mnuchin simply reminded the world that cryptocurrency businesses have to follow U.S. rules about KYC, anti-money laundering, and FINCEN registration. Then he talked about Donald Trump’s racist tweets, the technical problems of putting a black woman on a $20 bill, and how the U.S. government will run out of money soon.
He made one comment that people seemed to latch onto. Here’s the quote:
“Cryptocurrencies such as bitcoin have been exploited to support billions of dollars of elicit activities like cyber crime, tax evasion, extortion, ransomware, illicit drugs, human trafficking…and maligned behavior.”
That is a true statement, but try telling that to crypto twitter.
Immediately, everybody pointed their fingers in the air and collectively shouted “so has the [fill in your most-hated financial instrument]!”
Yes, you’re right. People have committed crimes using dollars, governments, banks, shell companies, real estate deals, boats, accountants, and actual humans.
That’s why the U.S. has laws for all of those things.
Why so angry about U.S. having laws about cryptocurrency, too?
Shady assets die, clean assets thrive
Andreas Antonopoulos talks often about the “gentrification” of cryptocurrency. He doesn’t like it, but realizes it will happen inevitably.
When arguably the most influential thinker in this space accepts regulation, you may want to accept it, too.
If you care about selling your bitcoin for more than you bought it for, you need clean, safe markets. There’s a reason drug lords get shot and jailed while pharmaceutical executives get bonuses and stock options. One sells illegal drugs to junkies, the other sells legal drugs to people in need. One works in the shadows, the other serves on blue ribbon panels. One makes millions, the other makes tens of millions.
Do you want to risk going to jail for illegal cryptocurrency that almost nobody uses? Or would you rather get rich with legal cryptocurrency that everybody uses?
If you care about adoption and “mainstream” usage of cryptocurrency, you need the U.S. to validate the technology and the industry around it. Do you really think your mom will open a Coinbase account? Could you see your grandfather downloading a Jaxx wallet? Will your aunt care about getting $10 in XLM for watching a cryptocurrency video?
If so, ask yourself why they haven’t done it yet.
If not, we agree. Your average person will not trust their money to some upstart fintech company or a software program. But . . .
Swipe a Visa card that uses bitcoin’s lightning network as a free payment rail? No problem.
Let their financial advisor put a few hundred dollars into a bitcoin ETF? Ok, why not, you never know, right?
Take a small loyalty discount for buying their Starbucks with Bakkt’s cryptocurrency-based merchant services? Thank you Starbucks!
That only happens if people believe cryptocurrency is regulated and clean.
Wall Street is a great example
Today, Wall Street is synonymous with greed and excess. Did you know it also keeps the world’s financial markets from collapsing?
In fact, if not for Wall Street, U.S. may never emerged as a financial powerhouse.
In 1792, U.S. equity markets were horribly disorganized and rife with fraud. A group of traders signed an agreement in a house on Wall Street to deal only with each other using fixed, transparent fees.
They set up small businesses around Wall Street to help them with settlement, clearing, certification, notarization, and legal activities.
Over time, it grew into the U.S.’s financial center. Now, Wall Street firms hold one-quarter of the world’s wealth, including $22 trillion in registered investment assets. It brings transparency and order to almost every market it participates in.
(For a small fee, of course.)
You can’t argue with the results. When 25 percent of the world (and almost every U.S. household with a 401k) trusts Wall Street with its financial fate, you have to give credit where credit is due.
Stupid, useless laws never killed any industry
To me, current U.S. cryptocurrency rules make little sense. It’s like going back to 1992 and seeing a law that forces internet companies to keep a paper copy of all emails. That defeats the whole purpose of email.
I do not understand why a blockchain company would need to spend hundreds of thousands of dollars on compliance costs related to its clients’ use of its blockchain. The company has no use or need for this information. Law enforcement can subpoena whatever information they need to confirm the information that’s already recorded on the blockchain.
Yes, you want to weed out the dark-web thugs and the cyber criminals. Do you really think those guys are planning to open a Gemini account? Have the bad guys never heard of Monero?
As we all know, perception is reality. If people think cryptocurrency is legit, they’ll use it. If that means we need some stupid, useless laws, so be it.
Perhaps we can listen to Anthony Pompliano on this one:
Let’s do things the right way, even if it seems stupid. We’ll end up better off in the long run.
Meanwhile, relax and enjoy the ride!
Mark Helfman is a cryptocurrency commentator and author of Consensusland, a Reader’s Favorite five-star rated book that explores a country that runs on cryptocurrency.