In 2008 the backing reserve mainly consisted of houses. In cryptocurrency I am quite serious about this, the backing reserve is gullibility.
It sounds like you are saying, one, crypto is all nonsense, but, two, the nonsense will go on indefinitely, because as long as you can make money out of thin air, you can find a sucker to buy it. Unless governments step in to say you can’t do certain things anymore.
Yes. The good news is that regulation is coming. Treasury is looking at this very closely, because basically they need to make sure that these crypto bozos can’t screw up the actual economy people live in. And they would absolutely screw up because they are idiots. And that’s what they got a taste of in 2019 when Facebook did, or tried, its Libra cryptocurrency, and every regulator, central bank, and Treasury Department in the world said, “No, you fucking aren’t.” Because Facebook didn’t know what they were doing and they were very arrogant because they didn’t care that they didn’t know what they were doing. So basically, about a month later, the entire US administration, the Democrats and the Republicans were united in this, crushing it like a bug.
So on the regulation question, are we talking about something like, if you have a stablecoin, you actually have to be audited and prove that you actually have a dollar for each of these stablecoins that you say is backed by a dollar?
Such a proposal, yes. There are different versions of this, such as requiring stablecoins to be issued by real banks that are highly regulated, and so on. Bills have been submitted for this. None have succeeded, but these ideas are very much in the air.
The point is that regulators are reluctant to act too quickly, and they also have limited enforcement budgets. But I’ll tell you who really wants to regulate crypto: the money laundering police. FinCEN are absolutely humorless agents who don’t care if they crush your business. And internationally the FATF, which sets rules that regulators must follow if they want their country to be allowed to do business with someone else. Those guys put in a bunch of rules coming in 2021 to make crypto transactions more traceable. I think we’re going to end up with a kind of two-speed crypto market. You will have the entities that are known exchangers where people are traceable, and turning it back and forth into real money is relatively easy, and then there will be another market that is running high on crack and is just incredibly unregulated and a much harder time to get to the precious US dollars.
Most people don’t own crypto, and yet you have Fidelity offer Bitcoin in 401(k)s you have Wall Street institutions investing more and more in crypto. How Much Could a Crypto Collapse Affect the Broader Economy?
The main thing to worry about is that these bozos really want to get their ranks in the real money world. I think for a lot of them that’s the end game: put it on people’s retirement accounts. Now, in March, the Department of Labor issued a notice warning financial advisers not to tell retirees to put their 401(k) in crypto. And Fidelity went and offered this product anyway. They really, really want to get into important products because that way, when it collapses, they look forward to the government becoming the last resort. And this is something that must be fought hard against. It hasn’t happened yet, but we should be afraid of it.
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