Crypto.Scam?

What a clever currency alternative. Decentralized blockchain-protected cyber currency enabling “secure” transactions and tradeable “assets” that served as arbitrage investments. Wow. Was [is?] this new phenomenon an SEC-regulated “security,” or perhaps a commodity? Why were state and national governments vying to make cryptocurrency a locally desirable financial reality? El Salvador even recognized it as a viable currency. But then criminal enterprises and nations seeking to circumvent sanctions also found cryptocurrency a wonderful workaround that avoided unwanted transparency or scrutiny. And then came the crypto-scammers, bilking the public at levels even convicted pyramid-king, Bernie Madoff, had to admire.

So, what was the supporting underlying “asset” that made crypto so desirable, exploding in value, making billionaires out of thin air? Until money just disappeared, and the market lost what some estimate was 80% of peak values. Faith. A willingness to trust a decentralized security promise that evaded scrutiny? Again, faith… and trust. No gold. No real estate. Nothing really tangible. And while most nations rely on the “full faith and credit” of their governments, seldom backed in gold today, at least there is a nation behind the currency. Argentina’s currency is notoriously volatile, and until recent congressional gridlock, the US dollar was (is?) the bastion of stability, the most prominent global reserve currency. Crypto’s got nuffin’. But if people believed, it could still work… blockchain decentralized complexity seems a viable “protection” if handled right.

Still, savvy investors looked on with severe skepticism. Warren Buffet’s partner (and vice-chairman) in Berkshire Hathaway, Charlie Munger, called cryptocurrency “the stupidest investment I ever saw” in the November 27th Moneywise. With all the Senate and House committees and subcommittees, you’d think they’d stop battling over imposing hard rightwing edicts that reflect only a small minority of voters and deal with the issues Americans need legislation to cover. And that would most certainly include protecting the public from the scandal-ridden world of the purveyors and champions of cryptocurrencies. Instead, federal regulators are trying to shoehorn existing laws to control crypto. It’s topic near and dear to the heart of Associated Press journalists (in November 27th), Fatima Hussein and Ken Sweet:

“The scandals in the cryptocurrency industry seem to never end, but Washington policymakers appear to have little interest in pushing through legislation to codify the structure of the industry… The latest shoe to drop was Binance’s multibillion-dollar settlement with U.S. authorities and the resignation of its chief executive last week. Before that came the conviction of FTX founder Sam Bankman-Fried for stealing billions from customers and the implosion of smaller crypto companies that cost investors large sums of money.

“When cryptocurrencies collapsed and a number of companies failed last year, Congress considered multiple approaches to regulating the industry… But most of those efforts have gone nowhere, especially in this chaotic year that has been dominated by geopolitical tensions, inflation and the upcoming 2024 election… In fact, the appetite for new rules seems more diminished than ever.

“At a news conference [in mid-November] announcing the $4-billion settlement with Binance, U.S. Treasury Secretary Janet L. Yellen said existing regulations already apply to cryptocurrency: ‘I think today’s actions show that we are serious about enforcing strong regulations that are already in place to make sure that illegal transactions are not fostered by cryptocurrency entities,’ she said… ‘In cases like this, where there are violations of a truly egregious nature,’ she said, ‘of course we want to make sure our tools stay up to date and are adjusted so that we can address emerging threats. We believe we have strong tools and we have been increasingly deploying them to counter this type of abuse.’

“And a group of more than 100 mostly Democratic lawmakers in October said the responsibility for preventing the use of crypto to finance terrorism belongs to the White House, calling for the Biden administration to act… [Meanwhile,] Changpeng Zhao, the CEO of Binance, pleaded guilty … to a felony related to his failure to prevent money laundering on the platform. Zhao stepped down and Binance admitted to violations of the Bank Secrecy Act and apparent violations of sanctions programs, including its failure to implement reporting programs for suspicious transactions.

“As part of the settlement agreement, the U.S. Treasury said Binance will be subject to five years of monitoring and ‘significant compliance undertakings, including to ensure Binance’s complete exit from the United States.’ Binance is a Cayman Islands limited liability company… Now the largest entities in crypto over the last couple of years — Binance, Coinbase and FTX — either are in severe legal trouble, are under investigation or have collapsed altogether.

“Without Congress, federal regulators such as the Securities and Exchange Commission have stepped in to take their own enforcement actions against the industry, including the filing of lawsuits against Coinbase, Binance and Kraken, three of the biggest cryptocurrency exchanges. Kraken was charged by the SEC last week with operating its crypto trading platform as an unregistered securities exchange… Additionally, PayPal received a subpoena from the SEC related to its PayPal USD stablecoin, the company said in a filing with securities regulators this month. PayPal says it’s cooperating with authorities.

“Some members of Congress have opposed the SEC’s actions on crypto, arguing that the SEC needs congressional approval to justify going after bad actors, or that crypto should be regulated more like a commodity, which would be under the jurisdiction of the Commodity Futures Trading Commission. One or both of those arguments have been made by legislators in both major parties… Sens. Debbie Stabenow (D-Mich.) and John Boozman (R-Ark.) proposed last year to hand over the regulatory authority over cryptocurrencies such as bitcoin and ether to the CFTC. Stabenow and Boozman lead the Senate Agriculture Committee, which has authority over that regulator.

“So although Congress has made proposals, it has yet to act. Part of the reluctance to act stems from lawmakers’ inability to coalesce around what crypto is in the first place, and further, the opposition to crypto altogether from some powerful members of Congress.” Those elected to Congress are paid well, have tons of financially valuable perks, get a full retirement package even for short terms in office… but they really do not seem to be able to govern!!!

I’m Peter Dekom, and if congressional gridlock continues, we will have to pay higher interest rates on borrowings necessary to support our federal deficit and just might lose out status as that primary reserve currency, a prospect that would inflict major pain on American wallets.