This week in crypto. Nov 22-28: These officials hostile to crypto, Metaverse rising and more...
As crypto starts playing an increasingly important role in our societies, it becomes a hot topic for politicians and officials of all kinds.
The majority of non-elected officials holding positions related to money are hostile to crypto, of course – what else could be expected of people who earn their living by maintaining the current monetary order? Central Banks, Treasuries and “international” organizations like IMF are among the most vocal ones.
A handful of elected politicians, usually representing local powers and aiming at developing businesses, start to voice pro-crypto opinions, but on the high level the majority of politicians have taken the “concerned” stance, like India’s Narendra Modi, or straight-on negative ones, like Germany’s Olaf Scholz or the American Hillary Clinton.
Main attack lines on crypto
Crypto critics have been using the same 4 strategies for years already, despite numerous studies demystifying them:
crypto is used for ✔️criminal activities and money laundering (Former CIA Director Michael Morell’s study shows less than 1% of Bitcoin is used in illicit Finance )
Bitcoin mining is ✔️bad for the environment (although it uses less energy than Christmas lights, and almost 66% of it comes from renewables )
Bitcoin is ✔️volatile (but in the middle-term always going up, unlike fiat)
crypto is worthless and it’s all a ✔️Tulip bubble (tell this to the unbanked, to the people living in countries with ramping inflation – soon all of us – or under an authoritarian regime, to those who send remittances…)
But… who wants to read a study or an argumented opinon when politicians’ claims are short and easy to remember ?..
This week we saw new German Chancellor Olaf Scholz, ex-Democratic Presidential candidate Hillary Clinton, IMF and the Head of Bank of England attacking crypto.
IMF
Based in Washington D.C, IMF is an organization created in Bretton-Woods in 1944 in order to address any potential disequilibrium within the dollar/gold exchange rates, when USA was formally appointed as a keeper of the world’s gold reserves. Decidedly, it couldn’t prevent the biggest disequilibrium of all times, when President Nixon simply stopped dollar convertibility to gold 😏
IMF’s official role nowadays is to “reduce global poverty, encourage international trade, and promote financial stability and economic growth”. An alternative role that some, D.Center included, believe to be closer to the truth, is to maintain a dollar-based monetary status quo.
This week IMF issued a statement on El Salvador, unsurprisingly condemning its adoption of Bitcoin as legal tender, citing its “✔️ high price volatility” that would entail “significant risks to consumer protection, financial integrity, and financial stability”. The report mentions that “efforts to improve financial inclusion and raise growth are welcome”, but somehow concludes that “Bitcoin should not be used as a legal tender”.
It was difficult not to mention financial inclusion (a month after the launch of Chivo, roughly half of Salvadorans used it, which is more than they have ever used banks) and growth (this year Salvadoran economy is expected to grow 10%). Moreover, so far the country’s Bitcoin Trust has generated gains enough to fund the building of 20 schools and a vet hospital. But at least the IMF is genuinely concerned about its well-being 😂
Central Banks
ECB
The world’s most crypto-hostile central banker is probably a 65-year-old Christine Lagarde, President of the European Central Bank, famous for her “Cryptos are not currencies. Full stop”. She also told that Bitcoin “is a highly speculative asset, which has conducted some funny business and some interesting and totally reprehensible ✔️money laundering activity.” Madame Lagarde is also an ex-Director of the IMF, and an ex-Minister of the Economy in France, paving her way in high-level politics without having ever been elected.
She is not the only crypto critic at the ECB: its board member Fabio Panetta once described Bitcoin as “a very dangerous animal that’s used for ✔️criminal activities.”
This week the ECB approved a new oversight framework for electronic payments, schemes and arrangements (PISA), this time including crypto and related service providers.
The Fed
At the head of the American Federal Reserve serves a 68-year-old Jerome Powell, who was this week re-appointed by President Biden to continue his office. He is an ex-Head of Treasury and, quite logically, doesn’t like crypto: “You wouldn’t need stablecoins; you wouldn’t need cryptocurrencies if you had a digital U.S. currency. I think that’s one of the stronger arguments in its favor.”
However, the most aggressive US state official is a 75-year-old Janet Yellen, the head of Treasury… and the ex-head of the Fed, once again showing the eternal rotation of non-elected (but highly connected) officials.
She is known to have said that Bitcoin is an “extremely inefficient way to conduct monetary transactions” (kudos for an unusual attack line, although totally laughable) and “✔️the amount of energy that’s consumed in processing those transactions is staggering”.
She also thinks that “people should be aware it can be ✔️extremely volatile” and, being a nice person as she is, worries about “potential losses that investors can suffer.”
Janet Yellen is rumored to be one of the moving forces behind the acceptance of crypto provisions in Biden’s Infrastructure Bill, which would seriously impede the American crypto industry.
Bank of England
The Bank of England’s Governor, a 62-year-old Andrew Bailey (ex-Chief of the Financial Conduct Authority, having hold different positions within the Bank of England for 12 prior to that) is also a long-time crypto sceptic.
He couldn’t resist jumping into El Salvador’s debate , saying: “It concerns me that a country would choose it as its national currency. What would worry me most of all is, do the citizens of El Salvador understand the nature and ✔️ volatility of the currency they have.”
El Salvador’s President Nayib Bukele’s response says a lot about such concerns, and could be applied no only to Mr Bailey, but to other officials too:
High-level politicians
Olaf Scholz
Germany is one of the most crypto-friendly European states that levies no taxes on crypto gains, authorizes banks to provide crypto services and its popular investment vehicles – the Spezialfonds – to invest up to 20% in crypto.
This week its incoming government presented a coalition agreement that vaguely mentioned “new dynamic in relation to the opportunities and risks from new financial innovations, crypto assets and business models”, also mentioning “the possibility to expand the issuance of electronic securities to include stocks” – all rather optimistic for the crypto industry.
The new Chancellor, however, does not share this enthusiasm. A 63-year-old Olaf Scholz (politician for 46 years) has warned of a “✔️ tulip-style bubble developing in the crypto market” (ah, these tulips…) and said that the currency monopoly must remain in the hands of states.
Hillary Clinton
Currently not holding an office, but still having a lot of influence in the US politics, 74-year-old Hillary Clinton (politician for 56 years) has recently started multiplying anti-crypto speeches.
She reiterated several times that crypto can “undermine dollar as world's reserve currency” and “destabilize nations”.
A life-long politician, Mrs Clinton must believe that the dollar as a world reserve currency is a necessary condition for the worldwide prosperity and the stability of all nations, and all the world’s misery will not suffice to convince her in the opposite. At least, she acknowledged crypto as a disruptive force that will change the current monetary order… in her way.
However, in the most recent interview she got in a muddle, mixing social media algorithms and some evil forces “controlling” crypto: “Imagine the combination of social media, the algorithms that drive social media, the amassing even larger sums of money through the control of certain cryptocurrency chains. We’re looking at not only states such as China or Russia manipulating technology of all kinds to their advantage. We’re looking at non-state actors, either in concert with states or on their own, destabilizing countries, destabilizing the dollar as the reserve currency.”
Maybe she needed to dash crypto at any price, but unfortunately, the TV host asked only about social media? Or she assimilates things she doesn’t understand with evil, and all evil things must surely be Russian or Chinese?..
It is not surprising that so many high-level offifials and politicians are hostile to crypto. The blockchain can replace a central authority with a decentralized system, challenging the very basis, on which their power stands. However, we must not forget that it’s not only their actions that can influence our lives, it is our actions that can also influence theirs too. Let’s act accordingly.
NFT and Metaverse
As the Metaverse concept becomes increasingly popular, more companies jump in.
Software and gaming companies ambition to develop their own metaverse, like did Niantic, the creator of Pokemon Go. Niantic intends to create an augmented reality metaverse, mixing the real and the virtual, although it’s not sure yet whether it intends it to be open or centralized.
Companies producing consumer goods are of course mostly interested in metaverses as a marketing tool, which would allow to engage with their customers in many new ways. Thus, Nike and Adidas are already competing for the metaverse: Nike presented a virtual gaming space within Roblox, while Adidas announced having bought a plot of land in The Sandbox.
Markets
Bitcoin
Bitcoin price fell 10% this week, following the fears of a new Covid variant, which, although unrelated to crypto itself, has provoked a wide risk-averse reaction, sending stock and crypto markets down. This allowed the whales and El Salvador buy the dip 😅, and then crypto markets have recovered, Bitcoin regaining most of its loss on a Sunday night, and now sitting at a $57k level.
Contrary to the “inefficiency” claims of Janet Yellen, Bitcoin network is now processing more money than PayPal (about $489 billion per quarter in 2021 vs PayPal’s $302 Bn), 27% of Mastercard ($1.8 Tr per quarter) and 15% of Visa ($3.2 Tr), as calculated by Blockdata.
Ethereum
Ethereum traded sideways, but in the end landed on the same level of $4’300 as in the beginning of the week. Ethereum price overall is acting better than Bitcoin’s, which led some analysts to think that it has the potential to outperform it in the near future.
Quote of the week
“It’s unusual for an abbreviation to experience such a meteoric rise in usage, but the data we have from the Collins Corpus reflects the remarkable ascendancy of the NFT in 2021. NFTs seem to be everywhere, from the arts sections to the financial pages and in galleries and auction houses and across social media platforms. Whether the NFT will have a lasting influence is yet to be determined, but its sudden presence in conversations around the world makes it very clearly our word of the year.”
Alex Beecroft, managing director of Collins Learning, on Collins electing NFT as a word of the year