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So far, there has been much talk about cryptocurrencies and their compatibility with the American government’s regulatory structure, especially one as “dynamic” as the Trump-led administration. Last week, President Trump caused a stir when he tweeted his disapproval or Bitcoin, as he called the world’s most popular cryptocurrency a volatile asset that is very prone to be used for illicit activities.
I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air. Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity….
— Donald J. Trump (@realDonaldTrump) July 12, 2019
In a press conference organized by the White House earlier, Mr. Steve Mnuchin, the Secretary of the United States Treasury, went on to echo the sentiments of his boss. Mnuchin pointed out that he shared the president’s views on crypto-assets being volatile and prone to being used in criminal activities.
Mnuchin and Trump have so far focused on Libra and Bitcoin, and for good reason too. Bitcoin is the oldest and most widely-adopted digital asset on the market, and while Libra hasn’t even been released yet, it signaled the first time that a major company will be entering the crypto market, and its significance is bolstered by the fact that this company is Facebook.
However, while their focus on both Libra and BItcoin is an error, it’s forgivable one. The unforgivable mistake would be Mnuchin categorizing both assets as being the same, even though it has been consistently established that both assets aren’t the same on a wide array of parameters.
Mnuchin said, “As the president has said, Bitcoin is highly volatile and based on thin air. We are concerned about the speculative nature of Bitcoin and will make sure that the U.S. financial system is protected from fraud.”
Rather than crumble, the Bitcoin market actually did hold firm after Mnuchin’s comments. For one, it showed that while the U.S. authorities seemed to be ready to provide regulations to the use of digital assets within the country and the operation of cryptocurrency exchanges, it was evident that they were doing so out of a lack of understanding.
Shortly after the press conference, Barry Silbert, CEO, and founder of Digital Currency Group tweeted that the government had given a “complete and total vindication of Bitcoin.”
Other cryptocurrency insiders had varying views of Mnuchin’s comments. Brad Garlinghouse, the CEO and founder of RippleLabs, pointed out that while digital assets aren’t perfect, Bitcoin itself has come a long way from its days of being used almost exclusively as a criminal tool. He also stressed that for things to get better, it is vital for crypto businesses to cooperate with financial regulators to develop progressive policies.
Garlinghouse is right, but given that the regulators in question don’t seem to understand the differences between assets and are only focused on seeing cryptocurrencies as volatile, criminal investments, it’s very possible that any regulations that they put forth will only hurt the growth of innovation in the industry.
It’s obvious that activities like Bitcoin trading and others have made cryptocurrencies much more than just “criminal assets,” but we already know that. It’s particularly shocking that the American government doesn’t seem to understand this yet, so it’s interesting to see how they choose to regulate an industry that they’ve yet to get a grasp on.