The previous week was a rough one for the cryptocurrency community in the US. The same happened despite the unfolding (and now floundering) rally that took the bitcoin price towards 11,000 USD. However, the same domain in the US got a completely different shade with some news related to upcoming regulatory changes many are already calling a crackdown. Steven Mnuchin, the US Treasury secretary warned that new and significant cryptocurrency and bitcoin regulations can be expected. However, he was not alone in presenting worrying signs for anyone in the crypto domain.
Other officials were a lot more blunt in their statements. Neel Kashkari, Minneapolis Federal Reserve president called cryptocurrencies a giant garbage dumpster. Following this, the mainstream media immediately took to examining the bitcoin price movements in the wake of this rally. Not surprisingly, the global market did not stutter in their behavior as bitcoin remains up by nearly 50 percent since the start of the year. However, they are a big threat to the local US crypto industry and even more importantly, for the overall potential of the wider blockchain technology in the most powerful country in the world.
Mnuchin explained that in the coming period, there will be a lot of regulatory news coming regarding the cryptocurrency business. Of course, this will come accompanied by the message of the importance of underlying tech. That is why he said that the regulatory agency does not want to hamper development and that it offers the chance for the technology to move forward. However, he also underlined that the regulators want to make sure that the cryptocurrencies are not used for what he labeled as the equivalent of a Swiss secret numbered bank account. Decades ago, these so-called numbered accounts only came with a series of digits which made everyone who has such an account anonymous to anyone except the bank itself.
The same practice made Switzerland a haven for all manner of illegal money transfers and a place where criminals and corrupt officials from all over the world deposited their funds. To Mnuchin, the danger is that now, anyone can do the same with the cryptocurrency wallets. These are today widely used for things like online BTC gambling, web purchases, and many more things. On the surface, they do not come under the rules and regulations of individual nations. Now, the Treasury Department and FinCEN are determined to spend more time defining and regulating the same space.
The crypto community in the US, especially its developers and startups will have plenty of problems with this notion. Firstly, Mnuchin is a person who is anything but neutral to bitcoin. In 2019, he warned that the same cryptocurrency is not going to be widely used in the US, but that at the same time, it could possess a substantial risk to US national security. Recently, other officials like Neel Kashkari jumped on this upcoming regulatory bandwagon. He said that the same digital currency lacks the basic characteristics of any stable fiat currency. According to him, the main reason why the USD has any value is the fact that the US government is behind its production monopoly.
However, as he explained, in the virtual world, there are countless other digital currencies and coins that have no value whatsoever. He also believes that anyone who has digital currencies has been basically scammed and that now SEC is going to put a stop to this. Department of Justice prosecutors also joined the bashing, although coming from a more practical side. They said that the bitcoin network is something like a mixing software which has the primary intention to mask the origins of any individual transactions. All these facts point towards a worrying scenario where the US government not just comes hard on the cryptocurrencies but uses several regulatory and judicial branches to do the same. A move like that would put the US on the map of countries that are extremely unfriendly towards the cryptocurrency ecosystem.
With the potential crackdown looming in the US, many developers, especially those who are only starting with their ventures, are considering alternatives. In this case, the bad news for the US economy is the fact that a clear alternative is already there – the EU and other European nations. One example is Switzerland, but other countries are in a similar situation. There, clear guidance and rulesets on crypto are in the law.
This includes crypto custody, rules for issuance of payments, exchange licensing, security and utility of tokens. With European rules being clear and more importantly – already in place – a small startup fearing an unknown crackdown in the US would likely quickly decide on moving overseas. In fact, the same process is already in place. For example, Facebook set up an independent governing organization that should overlook its future digital currency Libra in Switzerland. There, the Libra Association is already staffed and working, even though the same cryptocurrency is nowhere near its actual launch.
Lagging US Tech Landscape
Once again, there is a sense that the US is shooting itself in the foot with the most recent measures against the crypto market. Yes, the concerns from the Treasury department are justified and need to be addressed. Some do use cryptocurrencies for criminal purposes and the ecosystem lacks regulation. However, the measures that have been suggested, along with a “shoot first and ask questions later” attitude from all officials do not look promising to anyone in the same line of work. Adding insult to injury is that once again many of them, if not all, showcase a basic lack of understanding of how cryptocurrencies work.
So, in a domain where esports portals working with digital exchanges and media organizations that employ a completely different way of monetizing content are the norm, thinking that bitcoin is made out of thin air is simply uninformed, not cautious. All the while, the European nations will likely accept any potential influx of developers and companies with open arms. After all, the same would allow the EU to get a second chance at leading in a particular cutting-edge IT field. While the 1980 to 2020 period might have been a time when it had the passenger seat, the next decade could see the reversals of those roles. Oddly enough, it might be the US attitude that actually enables the switch.