Crypto Besieged?

11 May 2020 by rate3

I remember when a year ago - May 9, 2019 - I'd listened to Rep. Sherman talking about cryptocurrencies threatening to undermine the power base of USA I thought that they just officially opened a 'hunting season' on crypto.

Citing (Sherman): "An awful lot of our international power stems from the fact that the dollar is the standard unit of international finance and transactions [...] it is the announced purpose of the supporters of cryptocurrencies to take that power away from us."

It looked like that soon enough some top-dog politician might announce that 'cruptocurrencies abuse' is the 'public enemy number one' similar to what happened in June 1971, when Richard Nixon declared a politically feasible but practically absolutely pointless 'war on drugs'.

However, since then 'people's servants' have found for themselves much more exiting and electorally beneficial nemesis than the phantom crypto-menace. Nonetheless, this issue has recently resurfaced again in some media's commentaries. Is that to 'celebrate' Sherman's speech 'jubilee' or because the economic superstorm continues to gather its momentum?

An increasing number of analysts warn us that lawmakers of many countries will try to protect their native currencies and taxes revenues by outlawing 'non-government' crypto-currencies, closing all in-out ramps as well as actively persecuting non-abiding crypto-holders.

So, I've decided to have a closer look into that issue and publish my 5 arguments pro and contra this to happen during the next 1-2 years in most of the G20 countries.

Pro:

1) Disastrous economic situation will lead to capitals flight from 'native' currencies into all digital forms of money which then triggers the over-reaction of local politicians;

2) Regulators (specially, IMF, IRS and SEC) continue to legislate crypto-currencies out of existence. The complete ban will be the logical continuation of this policy;

3) Introducing a 'digital dollar' (or other native 'electronic' currency) will induce local bureaucrats to protect their 'project' by eliminating all competition;

4) The rise of nationalism all across the globe will lead many countries to isolate themselves from the international financial market by banning all non-native currencies transactions;

5) As crypto-market continues to attract the attention of world's traditional medias by its scandals and booms-and-busts cycles it now presents a low-hanging fruit for all sorts of ambitious politicians, which are looking to gain public attention by introducing the next 'lives-saving bill' - f.e. to ban all crypto.

Contra:

1) It's not technically possible;

2) It had already been tried (notably, of course, by China in 2017) but didn't work;

3) 'Three letter agencies' are in fact the prime beneficiaries of wide crypto-currencies adaption as it allows to track all monetary transactions real-time;

4) Too many big corporations have already invested both politically and economically into the success of blockchain / crypto-currencies. Additionally, many governments are now looking for the way to get rid from their dependence of USD in international trade;

5) The crypto market is too insignificant compare to the traditional finance, which makes most legislators to disregard it in the nearest future.

So, what do we have to expect?

IMHO, in most G20 countries regulators would find it unfeasible to introduce the complete ban on all crypto-currencies. However, they might outlaw 'dark' as well as 'stable' coins. Besides, implementing the 'travel rule' will lead to all exchanges rejecting those transactions, which might be traced to an 'uncertain' origin (mixers including).

It will lead to a split of many existing non fungible coin / tokens to two inside groups - those which has an official way to fiat and those which does not.