It’s All about Control: The US and Crypto Regulation
In today’s Money Morning…five years ago, in Spain…US regulators want to control the crypto bull…no control…and more…
Today’s piece is all about the attempts by US regulators to regulate crypto and what it means for your wealth.
First, though, a personal anecdote which sets up the discussion nicely.
Five years ago, in Spain
It’s 2016 and my friend Phil and I are in Valencia, Spain.
We’d just touched down from London to attend Las Fallas — an annual fireworks extravaganza in the beachside Spanish city.
Everything about the city is surrealismo.
Mosaics line the walls of the subway stations on our way from the airport to the city centre.
We see this particular structure which is a homage to human technological achievement:
And we’re excited as we find ourselves amidst the opening day of a raucous festival.
We wander the plazas to take in the massive papier-mâché artistic structures which the city is famous for.
An old man leans over to light his grandson’s firework with his cigarette.
After asking for directions in my broken Spanish, we eventually make it to the meeting place.
Our host is Alexis, a local music producer, who we meet near the Plaza de Toros.
The next two days are filled with site-seeing, copious margaritas, and lots of low-grade explosives (fireworks) from Pirotecnia.
The first day or two in the city, the fireworks startle you. Then eventually you start lighting them off at other people’s feet and they don’t even flinch.
This is real freedom, we thought.
Some two days later, the main event arrives — the bullfighting festival at the Plaza de Toros.
I’ll be honest — it was horrific. Lots of blood and you wind up rooting for the bull.
There are rules around how long the bullfighters have to make the kill, of course.
So with a margarita in one hand and a cigar in the other, Phil and I enter a deep chat in the stands watching it all unfold.
At one point, Phil asks: ‘What does it all mean?’
I say, ‘Well Phil, someone once told me that it’s all about control, humans always want control.’
In some ways, bullfighting, as horrible as it is, is a rejection of cultural control.
I left after the fifth of six bulls went down.
I’d had my fill and couldn’t stomach another fight.
My chat with Phil will last in my memory for a lifetime, though, just as the graphic scenes will.
Five years ago, in Spain, nothing’s really changed when it comes to human nature.
And here’s where regulators thirst for control of crypto comes in.
US regulators want to control the crypto bull
The latest word on the street is that Securities and Exchange Commission Chair Gary Gensler won’t ban crypto.
As per CoinDesk:
‘The $125 billion of stablecoins we have right now are like poker chips at a casino…I do think that if this continues to grow — and it’s grown about tenfold in the last year — it can present those systemic wide risks… Even in decentralized platforms — so-called DeFi platforms — there is a centralized protocol. And though they don’t take custody in the same way [as centralized exchanges], I think those are the places that we can get the maximum amount of public policy.’
As for banning crypto, however…
‘When asked by Rep. Ted Budd (R-N.C.), a longtime crypto supporter and member of the Congressional Blockchain Caucus, if the SEC had any plans to follow China’s lead in banning cryptocurrency in favor of a prospective central bank digital currency (CBDC), Gensler said, “No, that would be up to Congress.”’
Which leaves us with a modicum of respect for Gensler.
He’s into regulation not prohibition.
So while he is protecting the bottom line of financial middlemen and ticket clippers, he’s not going to invoke the nuclear option that would once and for all reveal that the emperor has no clothes.
This, after the Fed gets embroiled in a scandal implying that they engaged in self-serving market manipulation.
Bottom line, US regulators want to control the crypto bull because it threatens US dollar hegemony as the global reserve currency.
Perhaps, just as much, if not more than e-CNY, the Chinese digital yuan CBDC.
Yes, I’m saying you should consider owning some crypto in this environment.
If China banned it, and US regulators are quickly moving to figure it out — it must be good.
Call it the contrarian ‘no control of the global financial system’ play.
And for guidance in navigating the rapidly-evolving techno-monetary landscape, look no further than New Money Investor.
Ryan Dinse and Greg Canavan helm the service and it is must-read stuff if you want to position yourself ahead of whatever central banks have up their sleeve.
Because when the CBDCs come, you better believe there will be fireworks.
For Money Morning
PS: Lachlann is also the Editorial Analyst at Exponential Stock Investor, a stock tipping newsletter that hunts for promising small-cap stocks. For information on how to subscribe and see what Lachy’s telling subscribers right now, please click here.