About a year ago, while the ecosystem of cryptocurrencies was in… a “summer lull”, close to bitcoin’s all-time highs, a report circulated on Twitter caused panic:
Based on the report, the US Treasury Department was preparing to impose the US government is preparing to impose sanctions for money laundering on financial institutions using cryptocurrencies.
This was preceded by another statement by US Treasury Secretary, Janet Yellen, on the need for regulatory intervention in cryptocurrencies.
The truth is that it was – and still is – something to be expected. But the collapse of the USDTerra stablecoin and the ‘crypto-winter’ that has plunged millions of people around the world into despair who have lost their investments (often their entire savings or fortunes) have accelerated developments.
Thus, on Thursday the US Treasury Department published factsheet from which it appears that Washington is preparing an institutional framework for the transnational control of cryptos.
The U.S. Treasury Department, which was issued in “response” to the Executive Order issued by the US President, Joe Biden for the cryptos, says the institutional framework “is intended to ensure that America’s core democratic values are respected”, meaning the protection of consumers, investors and businesses, the security of the global economic system and interoperability.
And of course, he stresses that the policies in the framework include “reducing the potential use of cryptocurrencies to finance illegal activities, promoting accessibility to financial services, supporting technological advancement, and strengthening American leadership in the global economic system.”
Indeed, at this point, it is emphasized that the U.S. “must continue to work with its international partners on the evolution of digital payment architecture and central bank digital currencies to reduce payment inconsistencies and ensure that any new payment systems are consistent with U.S. values and legal requirements.”
Although discussions have already been held with some central banks and countries are under pressure to agree to interstate control, the factsheet reports that the International Monetary Fund will play an important role in overseeing digital assets, and is even called upon to provide technical assistance in designing state institutional frameworks for digital assets and payments.
Similar roles will be played by the World Bank, the Asian Development Bank, etc.
It has been some time since Yellen, a person whom the markets take very seriously, even before she served as head of the Fed and then head of the US Treasury insisted that the regulation of cryptocurrencies must come and it must come quickly.
In fact, she was implicitly saying that cryptocurrencies should “either be regulated or disappear”, warning at every opportunity about the “inefficiency of blockchain technology in terms of the use of currencies.
Typical is her statement at last year’s New York Times DealBook conference. There, the US Secretary of State made the link between the bitcoin – and therefore the other cryptocurrencies – with the improper funding. This is because, as she explained, the peer-to-peer architecture of the network bypasses banks, monetary and other authorities, making it popular with extortionists (not coincidentally all ransomware requires payment in bitcoin), hackers, child pornography dealers and all sorts of outlaws who (also) trade on the dark web.
Not surprisingly, this rhetoric of Janet Yellen represented almost the entire world system. Not coincidentally, similar positions, in line with the head of the world’s largest economy, were taken by other officials, most notably the head of the ECB, Christine Lagarde, Indian officials and other governments, linking the use of bitcoin to activities such as money laundering, terrorist financing and other illegal activities.
And why does this matter?
Although we don’t have details as to the regulatory framework, one thing is clear: That there will be supervision by central banks, which will also issue their own digital currencies (digital dollars, euros, yuan, rubles, etc. are in circulation or planned).
This in itself, refutes the basic argument for the creation of bitcoin, which was total freedom/independence from regulatory authorities.
Jesse Powell, CEO of Kraken, the fourth largest cryptocurrency exchange on the planet (based on transaction volumes), previously predicted “tightening up the way governments treat cryptocurrencies”, explaining that “something like this could really hurt cryptocurrencies and kill the original thought for their use, which was to make financial services accessible to everyone”.
And indeed. By taxing digital assets and especially cryptocurrencies has already debuted in the US and the anonymity it provides is under debate as to its legality, all that remains is the their formal regulation by central banks.