Reason #23 to Vote Blue on Nov 5
This is a Washington Post Editorial, August 3, 2020
When he was president a few years ago, Donald Trump called it “a scam.”
Nothing much has changed about cryptocurrency since then. In fact, the biggest news has been the spectacular crash of cryptocurrency exchange FTX and the conviction of its founder on fraud charges. Cryptocurrency is a volatile asset with no intrinsic value. It is used almost exclusively to speculate or to engage in shady businesses, such as selling drugs or collecting ransom, for which the anonymous nature of crypto accounts comes in handy.
The former president, however, has changed his tune, promising to make the United States the “crypto capital of the planet.” And the Republican Party seems eager to follow. Sen. Cynthia Lummis (R-Wyo.) has proposed that the federal government purchase around 5 percent of the world’s bitcoin supply to build a strategic reserve such as the ones the United States has for oil and gold.
Mr. Trump’s pivot attests to a new power emerging in American politics: a class of technological entrepreneurs and venture capitalists uncomfortable with government regulations intended to protect American consumers.
Crypto backers are staking their considerable fortunes on Republicans in 2024. Fairshake, a pro-crypto super PAC, has raised more than $200 million. The Winklevoss twins — big crypto investors who launched the Gemini crypto exchange — have contributed millions of dollars. Venture capitalists Marc Andreessen and Ben Horowitz, perhaps the biggest investors in crypto firms, have offered support to pro-Trump PACs. Silicon Valley entrepreneur Peter Thiel helped launch the political career of Sen. JD Vance (Ohio), who is now Mr. Trump’s running mate.
Cryptocurrencies such as bitcoin are bits of code created when a computer solves some complicated mathematical problem. Their core appeal comes from the fact that their supply is dictated by an algorithm, and transactions are validated automatically, on what look like enormous public online spreadsheets.
The “value” of the so-called tokens does not rely on the government. This gives them a unique advantage in the eyes of conspiracy theorists — and criminals — wary of the state. They are safe from the machinations of obscure technocrats at the Treasury Department or the Federal Reserve.
But this means that, unlike dollars, whose value is anchored in the substantial trust that investors around the world have in the full faith and credit of the U.S. government, the U.S. economy and the Federal Reserve, the value of the tokens relies entirely on what other investors would be willing to pay for them. In this way, they are a bit like digital baseball cards (without the pictures). Untethered to anything real, their price soars and plummets wildly.
The crypto lobby now supports MAGA to push back against Biden administration regulators who have been trying to install some guardrails to protect investors.
Gary Gensler, the head of the Securities and Exchange Commission, has proposed that crypto assets be considered securities, subject to the same regulatory constraints covering other securities. The SEC has sued some crypto firms — such as Coinbase and Ripple — for failing to follow basic federal consumer protection guidelines.
This is hardly unreasonable, because it aims to offer investors in bitcoin and other tokens similar protections to those that cover other financial products. But the crypto lobby is up in arms. And it has not only convinced Mr. Trump that Mr. Gensler should be fired; it has also convinced some Republicans to support plowing the federal government’s own resources into this volatile asset class.
Consider Ms. Lummis’s plan for the government to buy 5 percent of the roughly 19.5 million bitcoins in circulation. On Wednesday they would have cost about $63 billion. A year ago, the Treasury could have picked them up for some $29 billion. Like any speculative asset, they could easily drop in value again. But the government would have to buy bitcoin from current holders of the cryptocurrency — that is, the ones currently doing the lobbying.
There is a precedent for a Lummis-like experiment. The government of Nayib Bukele in El Salvador invested more than $100 million of its scant reserves in bitcoin a few years ago and made it legal tender in the country. Soon after, the International Monetary Fund warned the country about the “large risks associated with the use of bitcoin on financial stability, financial integrity, and consumer protection.”
Mr. Trump’s old crypto skepticism was correct, and it still is. Americans should see nothing appealing about Republicans’ shift to please a new interest group seeking to sell a risky product without limitation — and, indeed, their plan to use taxpayer money to help these wealthy investors.
All of the above is actually an editorial in The Washington Post, August 3, 2024. [I definitely do not write that well!]
The Post’s View | About the Editorial Board
Editorials represent the views of The Post as an institution, as determined through discussion among members of the Editorial Board, based in the Opinions section and separate from the newsroom.
Members of the Editorial Board: Opinion Editor David Shipley, Deputy Opinion Editor Charles Lane and Deputy Opinion Editor Stephen Stromberg, as well as writers Mary Duenwald,Shadi Hamid, David E. Hoffman, James Hohmann, Heather Long, Mili Mitra, Eduardo Porter, Keith B. Richburg and Molly Roberts.
Resource: My Washington Post Subscription gives me ten articles per month to share freely. This is one such. Republicans suddenly love crypto. Americans should beware: https://wapo.st/3ytijrF
