The end game for crypto regulation?

The end game for crypto regulation?


In my previous post, I laid out a small handful of reasons for why governments might want to let private crypto take hold and a few reasons why they might not.  This is pure speculation, but count me among those that think they will do all they can to try to slow it down.  Why?  It threatens the very core of the globe's existing power hierarchy. The US Federal reserve basically came out and said it themselves in their May publication on deciding to adopt a Fed CBDC.  Link to paper here.

Let me back up.  For years I’ve wondered why the SEC, CFTC, or some other financial regulator hasn't stepped in and deemed crypto to be a security.  Doing so with give them tremendous power within the jurisdiction of their own borders.  While significant, that power would obviously not be absolute given the decentralized nature of crypto.   In addition to that, many regulators have also delayed approving new investment vehicles such as true crypto ETF’s. I don’t know what the original reason for them dragging their feet was but with a reported 90% of the central banks around the world now looking to issue their own CBDC's, investment regulators must let the central banks catch up or they risk causing some pretty significant monetary policy headaches.   With the Fed being the granddaddy of all central banks given the dollar’s status as the global reserve currency, it must get its own offering sorted out before other major developed countries are likely to take an aggressive lead on the matter. Not doing so would be like putting the cart before the horse and the Fed can’t allow that to happen as it would literally jeopardize one of the most powerful sources of influence the US has other than its military: the USD.

On the other hand, they must also navigate the privacy issues that come with a high octane CBDC as well as the publicly traded banks that stand to be dis intermediated to a degree not yet defined.  Ever try to send a wire in a foreign currency?  It ain't cheap.  It’s clear the Fed has heard from this lobby as it said in May that it’s CBDC offering will compliment, not replace, the existing system, characterized by a public currency held in private accounts. So all of that leads me to believe that they are rushing to get something in place that has enough technology enabled functionality to actually improve on the existing system (more efficient cross border payments and improving access to banking?) but not go so far, at least publicly, to cause a revolt due to privacy issues.  That's going to be a fine line to for them to walk. 

We will then see a propaganda effort of the likes we’ve never seen before, coordinated across all branches of the government against private crypto.  Why aren't they already doing that?  Because they need the IP that the private sector has developed and the experience that comes with it.  At the point that the switch is flipped though, they will likely have a reasonably powerful tool in their hands and will do all they can to shape public opinion on it.  They literally cannot afford not to go all in on this.   In the meantime, the world bank, BIS, and IMF are all in overdrive making sure that the Fed’s system will talk to other countries.

So what’s the end game? The powerful doing everything they can to preserve their power sees like a reasonable guess to me. What does that look like? I don’t think they will try to kill private crypto.  I’m no expert but if I understand things correctly, they couldn’t that anyway. Rather, we’ll see them regulate the you know what out of the on and off ramps. Binance anyone? But more importantly, I think their biggest tool will be the propaganda machine to try to marginalize crypto fans.  They are likely to even turn it into a patriotic thing. 

Hope I'm wrong but I just don't see a world where they can allow a straight line adoption and maintain the power they've become accustomed to. 

Cheers,

NZFX

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NZFX
NZFX

Pursuing interesting conversations that help lead to truth. Twitter: @NZFX6


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