Rumors That Congress Is Working on a Bill to Control Cryptocurrencies Are True
Bitcoin has been enjoying a spectacular, if bizarre performance. In a period of less than a month, the original and most famous cryptocurrency has gone from about $5,700 to $17,700. I can’t think of a single stock, commodity, or currency that has gained about 300% of its value in so short a time. Bitcoin is merely one of over 1,300 cryptocurrencies, and there are new ones sprouting up every day; “another day, another crypto.”
Even Venezuela has announced the launch of its own crypto money, called the Petro, based on the South American country’s considerable oil reserves. But success, like power, comes with responsibility, and some people in government think that owners or “miners” of cryptocurrencies have been operating too freely for too long..
If something starts growing, like weeds, sooner or later, it grabs the wrong kind of attention. First, the People’s Bank of China (PBOC) targeted Bitcoin and other cryptovalues, comparing these ephemeral and little-understood “currencies” to the Tulip Bulb Bubble of the 1600s. But, while that news did rebound off a few international media outlets, there is an issue that hasn’t attracted much attention. It is not widely known that Uncle Sam may be working on a bill to round up cryptocurrencies with a legal lasso.
The government has pointed its keen eyes on Bitcoin and others like it with a bill on Capitol Hill, which is said to have been presented before the Committee of the Judiciary. Senator Chuck Grassley (R-Iowa) is said to have introduced legislation in May to this effect. A fact check suggests that such a bill has been presented as S.1241 – Combating Money Laundering, Terrorist Financing, and Counterfeiting Act of 2017. (Source: “S.1241 – Combating Money Laundering, Terrorist Financing, and Counterfeiting Act of 2017,” Congress.gov, last accessed December 11, 2017.)
It may not have passed yet, but there appears to be bipartisan support. Like many complex processes that are hard to understand and even harder to control, the legislation focuses on something that everyone can relate: tax evasion. Thus, the law focuses on criminalizing the failure to disclose crypto assets. (Source: “The Empire Strikes Back: Congress and Trump Prepare to Curb Crypto Tax Evasion,” Finance Magnates, December 6, 2017.)
Cryptocurrencies Are Hidden by Design
By their very nature, cryptocurrencies are hidden. Many people like them because transactions move under the legal radar and across borders. Therefore, they are ideal for anyone engaging in terrorism, money laundering, tax evasion, or smuggling. After all, if you or someone you know has ever fallen victim to so-called ransomware viruses online, you may have noted that the hackers demand payment in Bitcoin in exchange for releasing control of the affected computer(s).
If the hackers were to demand payment via PayPal, credit card, e-transfer, or bank transfer, they would expose the trail that authorities would use to identify them. Bitcoin, because it’s hidden by nature, evades all controls. Cryptocurrencies’ growing value and popularity can only accelerate legislative efforts to make these payment systems more transparent.
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Indeed, it’s not just legislation that raises concerns of the traditional cryptocurrency users. These tools have become too mainstream for the good of those who appreciated the privacy they offered. A cryptocurrency user could keep fortunes in virtual vaults, which no government could ever discover. But now, Bitcoin Futures have started trading on the Chicago Board of Exchange (CBOE) and will start trading on the Chicago Mercantile Exchange (CME) later this week.
Bitcoin Hits the Mainstream and Gets Exposed
Bitcoin has gone mainstream. Regulatory authorities will monitor transactions. Evidently, specially trained authorities will be taught to recognize and monitor unusual moves. Because cryptocurrencies function in such mysterious ways, most people will encourage moves to cage them in. It’s the reason witch hunts worked.
Apart from drawing the attention of Homeland Security and the IRS, Bitcoins and such currencies have drawn a different kind of attention. It’s not the good kind. Famed—and sensible—investor Warren Buffett is not a fan. He says that cryptocurrencies like Bitcoin are not tangible investments because you cannot establish their value; they don’t produce value. Cryptocurrencies are like a mirage. (Source: “Bitcoin up sevenfold since Warren Buffett warned digital currency was a ‘mirage‘,” CNBC, September 7, 2017.)
It’s not that Buffett is the sole word on investing. Even if Bitcoin’s price has gone up tenfold or more in the span of a few weeks, this is a mysterious product. We don’t even know whom its purported inventor, Satoshi Nakamoto, is. But overall, to Buffett or Joe Blow on the street, Bitcoin walks and talks like a bubble. Its price dynamics evoke speculative bubbles of the past because there seems to be no relationship between the cryptocurrency’s intrinsic value and its price. Many “investors,” for example, are buying Bitcoin without understanding what it is or how it works.
Everything is fine until it’s not. Because there’s no logic or intrinsic value, Bitcoin’s fluctuations are difficult to predict. Thus, there’s no guidance as to what to do in case of a crash. Should you sell, hold, or buy some more? There’s also the ban of Bitcoin exchanges in China. It won’t be long before others follow.