Cryptocurrency scandals will lead to CBDCs
Cryptocurrency scandals will lead to CBDCs
[International](/international/)
Cryptocurrency scandals will lead to CBDCs
In recent years, the world has witnessed a crippling pandemic, war in Europe, record inflation, supply chain disruptions, political chaos, uncertainty, skyrocketing debt, several nations de-dollarizing their economies, and the manifestation of innumerable crises. . With so much going on, many people struggle in times like these. People often ask me for advice on where they should put their money.
Inevitably, the conversation veers away from sound portfolio allocation strategies, such as stocks and dividends, bonds, real estate, and precious metals, to something I call the “lottery ticket dance.” More times than I can count, I hear a version of “So what do you think about cryptocurrency?” They are looking at cryptocurrency like a lottery ticket and hoping that it can give out the winning numbers. Usually the question means that the person is stressed and needs to find a way to make money fast.
I studied finance in college, but I am not a certified financial planner or adviser. I do not give recommendations. However, I give education and my opinion if people want it. No one should construe anything I say as investment advice, but feel free to label it my opinion. No one should invest in cryptocurrency if they cannot afford to lose every penny invested. The short thing about cryptocurrencies is that they are highly volatile and will eventually become illegal, rendering them worthless. Bill Slack wrote an excellent article detailing some of these thoughts.
What is the difference between currency and money?
Money and currency are closely related, but there are important distinctions. Money is a broader term for an intangible value system that makes exchange possible. Currency is the tangible form of money that is used in exchanges. If the market called them digital assets instead of cryptocurrencies, there would be little controversy. The government would use the capital gains tax codes to regulate the market. Capital gains is how the government taxes cryptocurrencies now. However, calling them cryptocurrencies presents a problem that needs to be addressed. If they are coins, they are tangible money and can settle transactions, which begs the question, what money do they represent?
Why will cryptocurrencies become illegal?
Currency regulation is the most critical function of a government. Politics and tax collection become extremely difficult if a government does not control the currency. Without regulating trade and taxes, all other government functions become moot. What good is grandiose legislation and unfunded massive spending bills? That’s why cryptocurrencies are already illegal in eight countries, including China, and heavily regulated and overtaxed in 43 other countries.
It is the regulation of currency that allows a nation the ability to exist. The Founding Fathers knew this well and included this idea in the Constitution. Article I, Section 8, Clause 5 of the U.S. Constitution reads: “Congress shall have power…to coin coin, regulate the value thereof and of foreign currency, and fix the standard of pesos and measurements. Power hates competition, so the most logical action will be to make cryptocurrencies illegal.
Why do I mention it?
About a year ago, I was in a discussion about cryptocurrencies and central bank digital currencies (CBDCs). I shared my opinion that cryptocurrencies would become illegal. My client asked me why the government allows them now. The reason connects the accelerated efforts of the government to produce a CBDC and the wild west of private cryptocurrencies.
Private cryptocurrencies have a purpose, but that purpose will be short-lived. Americans are strongly individualistic and need coercion before granting more power to the government. (You know, never let a crisis go to waste?) Also, mass adoption of a CBDC takes time. I told my client that private cryptocurrencies were a placeholder for empowering people on digital payments. However, as the government gets closer to launching a CBDC, we will hear about rampant crime and corruption related to cryptocurrencies. The media will be outraged calling for regulation and the people will demand that the government act. The initial government reaction will be regulation, and more bad things will happen, making cryptocurrencies illegal. Have you noticed all the cryptocurrency headlines lately as the Federal Reserve tests CBDC accounting software?
Consider these three examples in the last month. Bitfinex refuses to return billions worth of recovered stolen cryptocurrencies to its clients. The DEA says a drug cartel laundered millions of dollars through the Binance cryptocurrency exchange. FTX and their team of clowns scammed billions of investors. Enron researcher John Ray III said: “Never in my career have I seen such a lapse in corporate controls and such a complete absence of reliable financial information as happened here (FTX). From the integrity of compromised systems and flawed regulatory oversight abroad to the concentration of control in a small group of inexperienced, unsophisticated and potentially compromised people, this situation is unprecedented. There isn’t a more definitive statement about FTX than the guy who cleaned up Enron saying it’s the craziest thing he’s ever seen. Selah.
The list of scandals is much longer than the examples given. Still, two of these examples cost investors billions, and one is outright money laundering. Embezzlement, money laundering and fraud are serious scandals. The December 16 CNBC headline says it all: “Treasury financial stability watchdog says fraud is rampant in crypto markets.
The media reports many cryptocurrency stories on a weekly basis. Regulators expect more scandals to unfold and openly admit it. CNBC says that only 8% of Americans trust cryptocurrencies.
We have scandals. We have the global media barking about immediate regulation. What’s next, and how long until we get there?
India’s Central Bank Governor Shaktikanta Das thinks the regulation is a waste of time. Instead, he believes that the world should ban all cryptocurrencies to avoid the next financial crisis. It’s probably just a coincidence in October, the Central Bank of India announced that it was about to start testing for the digital rupee, and two months later calls for all private cryptocurrencies to be banned. In early 2022, the Central Bank of India announced that its CBDC was part of the 2023 budget.
Why is India calling for a ban on cryptocurrencies?
Reread the prediction. “As the government gets closer to launching a CBDC, we will hear about rampant crime and corruption in cryptocurrencies. The media will be outraged calling for regulation and the people will demand that the government act. The initial government reaction will be regulation, and more bad things will happen, making cryptocurrency illegal.” Is it surprising that India, like China, is much closer to a CBDC than the US and is calling for an outright ban?
There is an awkward saying in real estate. “If you can’t figure out who the fool is in the transaction, it’s you.” The axiom also applies to the crypto space. There is the promise of life-changing riches in a short period. Cryptocurrency is an unregulated and difficult to tax market with thousands of coins to choose from. It sounds too much like Pleasure Island in Pinocchio, where the children are turned into donkeys.
It may be a coincidence that my prediction was eerily accurate. Even a broken clock tells the correct time twice a day, and even a blind squirrel finds a nut now and then. However, if my assessment is correct, you should protect yourself now. The Central Bank of India probably revealed the following because it appears to be by design. Cryptocurrencies will eventually crash the market. The collapse will be massive, and the rationale for banning them and people will beg for stability. The Fed will usher in a CBDC soon after. Have you ever heard the phrase “evil prevails when good people do nothing”? The same is true for the bad things in your portfolio. You are not going to do anything?
Protecting yourself is not difficult, but it does require a phone call. Dont wait.
Protect yourself today.
