Opinion: Yesterday, Treasury Secretary Mnuchin testified that ‘We are about to roll out some significant new requirements,’ in response to a question on cryptocurrency. ‘We want to make sure that technology moves forward; on the other hand, we want to make sure cryptocurrencies aren’t used for the equivalent of old Swiss secret number banking.’
In 2019, the introduction of Facebook’s Libra Project, a cryptocurrency designed under the leadership of David Marcus, former CEO of PayPal, with the intention of providing the millions of unbanked populations around the world, sent shock waves to the leaders of nation states including the United States and China on the future of monetary policy and the balance of power in the 21st century.
The looming threat of cryptocurrency tokens run on blockchain networks with no influence or power that can be exerted by nation states – whether from bitcoin, the first cryptocurrency that operates off of a global decentralized network on computers, or from Facebook’s creation of a conglomerate of private corporations that stand to become a global digital central bank using blockchain technology to issue tokens that could become a new form of money as ubiquitous as the world wide web.
White House Policies do not typically happen in a vacuum. The Treasury has already warned cryptocurrency companies through the FinCen Director Kenneth A Blanco about needing to comply with Bank Secrecy Act rules. ‘Please remember what is at stake here.’ is how Director Blanco ended his speech at an event in November 2019 where he was discussing the importance of regulating cryptocurrencies to avoid its use by terrorist organizations or money launderers. He was following up on what The Financial Action Task Force (FATF), an international organization responsible for money laundering and antiterrorism policies, had already issued in terms of a regulation that is commonly known as the ‘Travel Rule’. This ‘Travel Rule’ makes it that when you are buying and selling bitcoin on a blockchain, the information of the sender and the receiver must be recorded on both ends of the transaction – something that ostensibly the Bitcoin blockchain network was never designed to consider.
Between FinCEN’s Director making statements on cryptocurrency companies that paint Mr. Blanco as nothing short of a modern ‘digital’ Elliott Ness during the days of Prohibition in the 1920s, and Secretary Mnuchin’s statements that have been consistently negative toward cryptocurrency and Bitcoin, all of this ‘noise’ appears to be part of a broader marketing campaign by the U.S. Government to protect its most important asset on the books: the U.S. Dollar.
Mr. Mnuchin’s harsh stance on cryptocurrencies is compared to the Federal Reserve Chairman Jerome Powell’s considerations on whether the U.S. needs to issue a digital U.S. dollar to stay competitive in light of both Facebook’s Libra as well as the growing possibility of a Chinese digital currency issued by their Central Bank. And even though the Federal Reserve is a bit of a quasi-agency that does not fall into the command and control of the White House as the U.S. Treasury does, Treasury Secretary Mnuchin and Fed Chairman Powell must be in communications on a variety of matters all the time – no less than during the Global Financial Crisis when Secretary Hank Paulson and Fed Chairman Ben Bernanke worked together as much as they would in a team project in college where the results had implications on both of them equally.
In no way am I asserting that a ‘ban’ on cryptocurrencies is planned legally – I am saying that perhaps the U.S. Treasury and the Administration are creating the most difficult regulations possible to comply with as a way of slowing down the growth of cryptocurrencies. An action such as this by the U.S. is not without precedent – T under President Roosevelt in 1933, gold was confiscated from U.S. citizens under Executive Order 6102 forbidding the ‘hoarding of gold coin, gold bullion, and gold certificates within the continental United States.’
As the disruption caused by cryptocurrencies and blockchain technology continues to be seen as a threat to the balance of monetary power, whether it is Venezuela, Iran, or China looking to create their own digital money, or Facebook, this Administration definitely appears to be signaling that these technologies are considered the ‘enemy’ and in upholding the Constitution, the U.S. must defend itself against enemies, both foreign and domestic.
The cryptocurrency and blockchain community in the United States waits in a sense of stunned silence – after all, the FATF ‘travel rule’ seemed the worst possible outcome for cryptocurrency business – an outcome that could not possibly get worse … until yesterday. If I am correct at estimating this current Administration’s policies as ways of countering both security from enemies, as well as from within the U.S., the prospect of something akin to a ban or close to it should not be that much of a surprise. A technology that threatens to replace the most important asset of the United States is going to face some degree of skepticism – it is up to the blockchain and cryptocurrency community to find ways to work together and help educate policymakers on ways that – perhaps we have not even thought of yet – will allow blockchain tokens that operate decentralized networks to operate while not stripping old-fashioned greenbacks of either their buying power, their utility, or their influence around the world.