by Greg Barker
Monday, 14
March 2022
Explainer
15:00

Slowly but surely, U.S. authorities are moving in on crypto

The SEC is denying applications from several Bitcoin-affiliated companies
by Greg Barker
The crypto forecast isn’t looking too bright

In an unsurprising move, the U.S Securities Exchange Commission (SEC), whose main purpose is to prevent and punish rampant market manipulation, is chipping away at the crypto’s legitimacy as a digital currency. Last week, it rejected the latest attempts by financial services companies NYDIG and Global X to list Bitcoin exchange-traded funds (ETF) as a “spot” product — meaning its price reflects what buyers pay for “immediate delivery” for Bitcoin. Instead, the SEC has added them to a long list of entities it has previously rejected, including big firms like Fidelity, VanEck, and WisdomTree.

These are some of the many corporations trying to jump on the hype train surrounding Bitcoin and cryptocurrencies. Their websites feature the common yet confusing siren call of promoting economic freedom and equality. NYDIG’s main homepage heading, for instance, reads: “Bitcoin For All.” But the reality is that this supposed economic liberty has created a new neo-feudal order in which a small minority of crypto-owners own the lion’s share of wealth. 

What’s more, the free-market forces behind crypto’s “Wild West” image have so far failed to form a self-regulating monetary system. Instead, we’ve witnessed the rise of Tether Ltd., a stablecoin (i.e. a cryptocurrency) that is pegged to one U.S. dollar, which has become a financial institution that issues its own currency, creating over $80 billion in phoney money with no accountability or oversight. In other words, it’s an offshore “wildcat bank”.

While traditional media, for objectivity reasons, has to remain neutral when reporting on Tether (outlets prefer to describe it as “controversial,”) the truth is that the company is an illicit enterprise. It facilitates almost 70% of all crypto trading volume while providing most of the liquidity to prominent crypto entities like exchanges, which have also been shown to manipulate over 90% of their trading activity. So as Tether comes up time and time again, it’s likely the main reason the SEC has denied the approval of these Bitcoin ETFs.

Still, the crypto lobby, which now contains VCs like Andreessen Horowitz and a small faction of the Washington elite like Cynthia Lummis and Pat Toomey, will stop at nothing to bring Bitcoin into the mainstream. Even the head of the SEC, Gary Gensler, who has a history of being favourable to blockchain tech, is somewhat siding with the pro-crypto lobby by supporting a Bitcoin futures ETF product, which is essentially a derivative of a highly manipulated currency. At the same time, he claims that that a Bitcoin spot ETF is too exposed.

So it seems that the mass bureaucratic mismanagement and conflicts of interest in this space have resulted in a crazy dynamic, where companies have been applying for ETFs in Bitcoin in a state that’s also calling crypto a threat to national security. Truly bizarre.

Greg Barker is an independent journalist and quant, who also writes under the name Concoda. You can find him on Substack and Twitter at @concodanomics.

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Michael Coleman
Michael Coleman
8 months ago

The US has multiple laws on the books to limit or force reporting of cash transactions above certain $ limits to control black market activities, tax evasion, etc. The fact there seems to be little effort in DC by any Party or political persuasion to ban non government controlled digital currencies leads me that a) few in DC really are serious about controlling those illegal activities and/or b) many in Congress are benefitting from crypto (from lobbying or owning) and/or c) they are clueless

Jon Hawksley
Jon Hawksley
8 months ago

Fiat money is a promise by a credit worthy party that they will pay you a certain sum in the future. You can sue for that sum of money. You can examine the credit worthiness of the party making the promise. A bitcoin is a tedious to calculate number that has a limited supply. Some people own bitcoins because they made the calculation and some have bought them in the hope that the limited supply will mean the price will go up. It is self fulfilling as the price going up attracts greedy buyers, however, if they go out of fashion and no one wants to buy one, they are worth nothing. You cannot sue anyone to get your money back. All a bitcoin acomplishes is a transfer of wealth from greedy and gullible investors to those who invented them. As long as there are greedy and gullible investors the price will hold or go up attracting more greedy investors. When everyone wakes up to the fact that it needs greedy investors to pay them out and that greedy investors will one day follow another fad, the price will plumet – the price will go to zero. Google tulip mania 1637.