- Jun 6, 2007
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This past Tuesday the Wall Street Journal had an article about cryptocurrencies that made the stark call that the Federal Government should make regulations that better wall off this volatile financial product from the rest of the economy and reduce the volatility in the crypto markets that trade these products. The title of the article was "Crypto Is Money Without A Purpose" written by Todd H. Baker. In a nutshell the article contends the Federal Regulators trying to shield the American economy from cryptocurrencies were right considering the hundreds of thousands of Americans that have had their cryptocurrency accounts decimated or wiped out or will so with the collapse of a major section of the cryptocurrency industry, that cryptocurrency investing is like gambling, that if America allows the cryptocurrency industry to extend its tentacles throughout the financial industry and the economy like the stock and bond industries does which could easily happen without good regulation a readily foreseeable downturn in the cryptocurrency industry could have a cascading effect that could bring the nation to the precipice of a total collapse like that which we saw in 2008 and 2009 which is called the Great Recession and finally that the Federal Government should do more vis-a-vis its regulations to mitigate and wall off the danger posed by cryptocurrencies!
The article says "Cryptocurrency trading (investing) is also gambling". That is the kernel of truth that should have Americans in a state of alarm until the Federal government contains this potential cataclysmic harm that could befall America. The reason why cryptocurrency investing is like gambling that is it is an incredibly dangerous use or deployment of money is that the product of cryptocurrency itself has little or no inherent value. Regular currencies have inherent value because they are the form of money that countries use to operate their economy they have Central Banks standing behind this form of money ready to prop up the value of such if need be; cryptocurrencies do not have such backing; gold and silver that people treat like currencies have the inherent value that they are used jewelry and in electrical products, cryptocurrencies have no such physical value. Which points to the crux of the problem with cryptocurrencies that their value is completely subjective the public can put a sky high limit on it or call it worthless both outcomes could readily unfold; which makes it extremely dangerous for ordinary people and businesses putting their wealth in these items because the value of these cryptocurrencies could readily disappear so then these people and businesses would lose their wealth with meaningful negative real world effects for them, the Federal government needs to protect against this harm before it happens.
The author in this article calls for some very prudent regulation that should happen yesterday. He calls for completely separating the traditional banking industry especially the investment banking industry from the cryptocurrency industry. American banks cannot own or operate cryptocurrency exchanges in whole or part meaning they cannot own the stocks of cryptocurrency businesses outside of banks that are stock market makers who would be permitted to hold the number of stocks needed to service those market making businesses. The reason being that what the American people is seeing that when these crypto markets collapse the liability on these exchanges is topping ten plus billion dollars we don't want commercial and investment banks taking this kind of financial loss because it will hurt their ability to make loans that will have real world negative consequences. The regulations should also ban these banks from being able to make loans to these crypto exchanges and even hedge funds and people and entities that will use the loan money to invest in cryptocurrencies; all these regulations will be protecting banks balance sheets from harm if the cryptocurrency markets tank! The author of this article also calls for a ban on margin trading for cryptocurrencies, this would be a very prudent move by Washington because it would reduce volatility in the crypto markets. Cryptocurrencies alone are inherently volatile in pricing because their pricing is largely completely subjective. Margin investing just makes this problem worse because it magnifies swings in the market when the market is going up it drives the market up more because margin investing creates more buyers because there is buyers participating only because they have borrowed money to invest and when the market is dropping you have more sellers selling their crypto assets driving down the price because these margin buyers are selling their crypto assets to mitigate their margin loan losses or they have to because they are under a margin call where they are required to pay back the margin loan.
Some other areas where the Federal government should regulate Cryptocurrencies to protect Americans and the American economy. Is it should outright ban investing in cryptocurrencies in retirement accounts, retirement monies are a safety net for Americans they should not be permitted to invest such needed monies in very high risk investments. Regulation should ban America's businesses from owning more cryptocurrencies than is reasonable foreseeable for them to operate their businesses meaning largely that businesses often have significant liquid assets which they often put in stocks and bonds to increase yearly returns as opposed to leaving it in a bank this spare capital should not be permitted to be put into cryptocurrencies because if it lost it will have meaningful negative real world consequences for these businesses. Federal regulation should ban any new cryptocurrencies, this invention as referenced is an extreme danger to America's economy and people; it is too late to put these Genies back in their bottles for existing cryptocurrencies but no more such Genies should be permitted to be unleashed in America. The Congress and the President have a significant test here does the people that are making billions of dollars behind this invention of Casino Capitalism with their army of lobbyists and their tons of money poured into Political Action Committees and politicians' campaign coffers win, do their interests prevail, or do the American people's interest win; does corruption or good government "carry the day" here!
The article says "Cryptocurrency trading (investing) is also gambling". That is the kernel of truth that should have Americans in a state of alarm until the Federal government contains this potential cataclysmic harm that could befall America. The reason why cryptocurrency investing is like gambling that is it is an incredibly dangerous use or deployment of money is that the product of cryptocurrency itself has little or no inherent value. Regular currencies have inherent value because they are the form of money that countries use to operate their economy they have Central Banks standing behind this form of money ready to prop up the value of such if need be; cryptocurrencies do not have such backing; gold and silver that people treat like currencies have the inherent value that they are used jewelry and in electrical products, cryptocurrencies have no such physical value. Which points to the crux of the problem with cryptocurrencies that their value is completely subjective the public can put a sky high limit on it or call it worthless both outcomes could readily unfold; which makes it extremely dangerous for ordinary people and businesses putting their wealth in these items because the value of these cryptocurrencies could readily disappear so then these people and businesses would lose their wealth with meaningful negative real world effects for them, the Federal government needs to protect against this harm before it happens.
The author in this article calls for some very prudent regulation that should happen yesterday. He calls for completely separating the traditional banking industry especially the investment banking industry from the cryptocurrency industry. American banks cannot own or operate cryptocurrency exchanges in whole or part meaning they cannot own the stocks of cryptocurrency businesses outside of banks that are stock market makers who would be permitted to hold the number of stocks needed to service those market making businesses. The reason being that what the American people is seeing that when these crypto markets collapse the liability on these exchanges is topping ten plus billion dollars we don't want commercial and investment banks taking this kind of financial loss because it will hurt their ability to make loans that will have real world negative consequences. The regulations should also ban these banks from being able to make loans to these crypto exchanges and even hedge funds and people and entities that will use the loan money to invest in cryptocurrencies; all these regulations will be protecting banks balance sheets from harm if the cryptocurrency markets tank! The author of this article also calls for a ban on margin trading for cryptocurrencies, this would be a very prudent move by Washington because it would reduce volatility in the crypto markets. Cryptocurrencies alone are inherently volatile in pricing because their pricing is largely completely subjective. Margin investing just makes this problem worse because it magnifies swings in the market when the market is going up it drives the market up more because margin investing creates more buyers because there is buyers participating only because they have borrowed money to invest and when the market is dropping you have more sellers selling their crypto assets driving down the price because these margin buyers are selling their crypto assets to mitigate their margin loan losses or they have to because they are under a margin call where they are required to pay back the margin loan.
Some other areas where the Federal government should regulate Cryptocurrencies to protect Americans and the American economy. Is it should outright ban investing in cryptocurrencies in retirement accounts, retirement monies are a safety net for Americans they should not be permitted to invest such needed monies in very high risk investments. Regulation should ban America's businesses from owning more cryptocurrencies than is reasonable foreseeable for them to operate their businesses meaning largely that businesses often have significant liquid assets which they often put in stocks and bonds to increase yearly returns as opposed to leaving it in a bank this spare capital should not be permitted to be put into cryptocurrencies because if it lost it will have meaningful negative real world consequences for these businesses. Federal regulation should ban any new cryptocurrencies, this invention as referenced is an extreme danger to America's economy and people; it is too late to put these Genies back in their bottles for existing cryptocurrencies but no more such Genies should be permitted to be unleashed in America. The Congress and the President have a significant test here does the people that are making billions of dollars behind this invention of Casino Capitalism with their army of lobbyists and their tons of money poured into Political Action Committees and politicians' campaign coffers win, do their interests prevail, or do the American people's interest win; does corruption or good government "carry the day" here!
