It Begins: US Treasury, Federal Reserve Upping Regulations & Rhetoric Aimed at Crypto
Jerry and Jan are coming for cryptocurrency
Jerry and Jan are coming for cryptocurrency
During a video message outlining US central bank policy, yesterday Federal Reserve Chair Jerome H. Powell responded “to technological advances driving rapid change in the global payments landscape.”
Powell insisted how “effective functioning of our economy requires that people have faith and confidence not only in the dollar, but also in the payment networks, banks, and other payment service providers,” and rather quickly juxtaposed this maxim against “the rise of distributed ledger technology, which offers a new approach to recording ownership of assets, [which] allowed for the creation of a range of new financial products and services—including cryptocurrencies.”
He furthermore chided, “To date, cryptocurrencies have not served as a convenient way to make payments, given, among other factors, their swings in value,” singling out advent of the stablecoin phenomenon, which he seemed to almost worry aims “to use new technologies in a way that has the potential to enhance payments efficiency, speed up settlement flows, and reduce end-user costs—but they may also carry potential risks to those users and to the broader financial system.”
The Fed Chair warned:
“Although the value of a stablecoin may be tied to the value of a dollar, these coins may not come with the same protections as traditional means of payment, such as physical currency or the deposits in your bank account. … As stablecoins’ use increases, so must our attention to the appropriate regulatory and oversight framework. This includes paying attention to private-sector payments innovators who are currently not within the traditional regulatory arrangements applied to banks, investment firms, and other financial intermediaries.”
For years, even brighter lights in the cryptocurrency ecosystem itself have wondered aloud about the substantive prospects of ubiquitous stablecoins such as Tether (USDt) ultimately forming a point of failure for speculative trading markets. Indeed, as Cryptobeat documented recently, Tether reached a $50 billion market cap, and a bonafide supermajority of Bitcoin is traded using USDt.
Powell mentioned a central bank digital currency (CBDC) as a potential Federal Reserve hedge against such innovation:
“The Federal Reserve has been exploring the potential benefits and risks of CBDCs from a variety of angles, including through technological research and experimentation.”
Above all else, however, “any potential CBDC could serve as a complement to, and not a replacement of, cash and current private-sector digital forms of the dollar, such as deposits at commercial banks,” promising formal discussion this Summer.
Leaving the Eccles Building about a mile away, a same-day message arrived from 1500 Pennsylvania Avenue, office of the 78th United States Secretary of the Treasury, Janet Yellen.
Tucked-in to a 24 page report titled, The American Families Plan Tax Compliance Agenda, page 21 reads in part: “businesses that receive cryptoassets with a fair market value of more than $10,000 would also be reported on. Although cryptocurrency is a small share of current business transactions, such comprehensive reporting is necessary to minimize the incentives and opportunity to shift income out of the new information reporting regime,” footnoting how “the IRS has identified cryptocurrency transactions as an enforcement priority and recently included cryptocurrency reporting on the individual tax return, Form 1040.”
A page before, under the subheading “Challenges of Cash and Virtual Currencies,” citing concern for greater reporting requirements, the report laments its actions “will shift taxpayers toward a greater use of cash.” But cash, the Treasury document confirmed, already has many tight legal controls and can be impractical, if not outright suspicious, in the modern age if used in large amounts.
“Still another significant concern is virtual currencies, which have grown to $2 trillion in market capitalization,” posing “a significant detection problem by facilitating illegal activity broadly including tax evasion.”
Get your ducks in a row out there. They’re coming.
He’s Baaaaaaaaaaaaaaaack!
It’s probably a coincidence definitive progressive US economist and go-to New York Times opinion columnist Paul Krugman also recently seized upon that $2 trillion number.
“Technobabble, Libertarian Derp and Bitcoin” is Krugman’s latest attempt at immortal infamy, and in it the burden of being Court Economist to several presidential administrations weighs heavy.
Followers apparently asked Krugman to “weigh in on Bitcoin and other cryptocurrencies, whose fluctuations have dominated a lot of market news. Would I please comment on what it’s all about, and what’s going on?”
He teased about Bitcoin in particular and crypto in general for playing “almost no role in normal economic activity. Almost the only time we hear about them being used as a means of payment — as opposed to speculative trading — is in association with illegal activity, like money laundering or the Bitcoin ransom Colonial Pipeline paid to hackers who shut it down.”
Krugman is at complete loss to explain just what problem cryptocurrency technology solves. He cannot think of a single one, save for the nefarious work of baddies or the growing hordes degenerate gambling rubes. The Nobel Laureate even trots out the Ponzi canard, noting “Bernie Madoff ran his scam for almost two decades, and might have gone even longer if the financial crisis hadn’t intervened.”
The barbarous relic gets a few tsk-tsks as well in his latest rant, with Krugman lamenting gold’s staying power amidst his clear disapproval.
Nevertheless, he prays, “governments are well aware that cryptocurrencies are being used by bad actors, and may well crack down in a way they never did on gold trading. Also, the proliferation of cryptocurrencies may prevent any one of them from achieving the semi-sacred status gold holds in some people’s minds.”
Ian Freeman Granted Bail
Back in late March, we gave voice to the harrowing experience of the arrest of longtime cryptocurrency advocate Ian Freeman. For two months, Freeman has been incarcerated, awaiting determination of potentially being released on bail in order to prepare an adequate defense against rather severe federal financial criminal charges related to crypto activities.
About two weeks ago, the New Hampshire Union Leader hinted at a pending bail order. New Hampshire-based freelance journalist Vincent Moore confirmed terms were reached on 20 May 2021 and should be issued formally soon.
According to Moore, the judge “set cash bail at $200,000 but allowed for the Shire Free Church to put up two properties as collateral to insure that Freeman doesn’t flee.” Terms are also said to be strict, so much so that during the trial period Freeman is not allowed to live in a house with firearms.
TechLead Capitulates
Patrick Shyu, best known as the droll and normally very funny YouTuber, TechLead, announced to his million plus subscribers he no longer holds cryptocurrency. Perhaps spooked by the latest dramatic market-wide downturn, Shyu only a week prior touted his portfolio gains which included crypto. His ex-wife was an early Bitcoin blogger, so TechLead appears to have a better-than-passing knowledge of the space. Citing looming regulation and coming government crackdowns, combined with a recent Tether audit, he’s out. Done. Dazzit. Shyu even later posted an all-out doom and gloom scenario video as well, going hard against stablecoins.
Rick and Morty Creator and FOX are Going Crypto
The Hollywood Reporter revealed the FOX broadcast network is teaming with Rick and Morty creator Dan Harmon that “will have groundbreaking technology involved in its distribution and marketing.”
Krapopolis is an animated comedy series “centered on a flawed family of humans, gods and monsters that tries to run one of the world’s first cities without killing each other.”
It will also be “‘the first-ever animated series curated entirely on the Blockchain’ and mark the broadcast network’s debut into the NFT business. Fox says it is also debuting a new NFT company called Blockchain Creative Labs,” The Hollywood Reporter noted. CEO Charlie Collier insisted “as an advertiser-focused, artist-first and animation-obsessed company, Fox is going to take advertisers into the world of blockchain-powered tokens, including NFTs,” which includes “a dedicated marketplace for Krapopolis ‘that will curate and sell digital goods, ranging from NFTs of one-of-a-kind character and background art and GIFs, as well as tokens that provide exclusive social experiences to engage and reward superfans,’” Collier stressed.
10,000 Reachable Bitcoin Nodes Spread Around the World
Documenting Bitcoin snidely noted, “Governments act as if bitcoin is magic internet money for 364 days out of the year, but on tax day it's real money all of a sudden,” after launching into a thread about the importance of Bitcoin nodes.
“There's about 10,000 nodes protecting the network right now, and each one has an entire copy of the #Bitcoin ledger that they use to enforce and validate the rules. If you're new to #Bitcoin and are wondering why your transaction may take a little bit to confirm? This amazing chart is why. Keeping the block size limited, makes sure the file size of the blockchain doesn't get too big for the average laptop to handle. The file size of the #Bitcoin blockchain is about 392.1 GB right now. Your laptop has much more space than that. But if #Bitcoin had larger blocks, it would grow exponential in size. The average person would never get to take part. The entire point of #Bitcoin would be lost. Only ‘server farms,’ warehouses filled with top-of-the-line computers, typically companies and governments, would ever get to download the blockchain. They would be the only ones with enough money and resources to buy the hardware needed to sync such a large amount of data. Every design choice has trade-offs. #Bitcoin is censorship-resistant money. That requires as many people as possible to run a full node that validates transactions, enforces the rules and protect the network for all,” the popular Twitter account argued.
Perhaps the thread was presaging Tesla’s Elon Musk stepping into what’s commonly known as the Scaling Debate a week later when he recently tweeted, “Achieving truly decentralized finance – power to the people – is a noble & important goal. Layer count depends on projected bandwidth & compute, both rising rapidly, which means single layer network can carry all human transactions in future imo. For now, Lightning is needed.”
By C. Edward Kelso, NBTV Head Writer.
Find more of Kelso’s work here: @coinfugazi / coinfugazi.com