Cryptocurrency: You'd Have To Shut Down The Internet To Ban Bitcoin

grarpamp grarpamp at
Sun Apr 11 16:06:25 PDT 2021

"You’d Have To Shut Down The Internet" To Ban Bitcoin, Says SEC's Hester Peirce

Any government efforts to ban Bitcoin would be “foolish,” said Hester
Peirce (aka “Crypto Mom”), a very Bitcoin-friendly commissioner at the
U.S. Securities and Exchange Commission (SEC), during a MarketWatch
virtual conference earlier this week, according to Cryptoslate
reporter Liam Frost.

"I think we were past that point very early on because you’d have to
shut down the Internet,” Peirce said, adding, “I don’t see how you
could ban it. You could certainly make the effort. It would be very
hard to stop people from [trading Bitcoin]. So I think it would be a
foolish thing for the government to try to do that.”

Not only that, but the government would immediately wipe out $2
trillion in net wealth - the market cap of the crypto sector - an
event that would have profoundly deleveraging consequences, and since
much of that wealth is now backed by debt, for example all those
debt-funded purchases of bitcoin by Microstrategy, such a move by the
government would immediately destabilize the all important debt

The statement came on the heels of Ray Dalio, a billionaire investor
and founder of Bridgewater Associates, arguing that there’s “a good
probability” that governments around the world would ban Bitcoin and
other cryptocurrencies.

Dalio told Yahoo Finance:

    “Every country treasures its monopoly on controlling the supply
and demand. They don’t want other monies to be operating or competing,
because things can get out of control. They outlawed gold, that’s why
also outlawing Bitcoin is a good probability.”

However, according to Peirce, the main issue for authorities—at least
when it comes to cryptocurrencies—is to find an approach to regulation
that would be productive and non-restrictive at the same time. She

    “We’ve seen other countries take, I would say, a more productive
approach. We really need to turn that around. And I’m optimistic, with
a new chairman coming in with a deep knowledge of these markets, that
is something we could do together—build a good regulatory framework.”

At the same time, Peirce also pointed out that she doesn’t know
when—or if—a Bitcoin exchange-traded fund (ETF) will finally be
approved in the U.S. Recently, we’ve seen a new wave of major
investment companies, such as Fidelity Investments, SkyBridge Capital,
and VanEck, filing their applications for Bitcoin ETFs with the SEC.

The regulator, however, never approved a single filing of this kind so
far, which as discussed earlier, may be a good thing for not only
bitcoin but the entire nascent DeFi ecosystem where hundreds of
billions in very real money is now intertwined.

There is another reason why the government may have no intention of
(ever) banning bitcoin: as Artemis Capital's Christopher Cole wrote
recently echoing what we said back in 2016 and 2017, "Bitcoin has
emerged as a "shadow" monetary tool, a type of liquidity overflow to
prevent even bigger asset bubbles in conventional assets such as
commodities, stocks and housing.

As Cole tweeted, "right now [bitcoin] helps Gov by serving as a vol
buffer for the middle class so money devaluation flows into a purely
speculative asset and less into home prices or other goods."

    Bitcoin is a "shadow" monetary tool
    Right now, it helps Gov by serving as a vol buffer for the middle
class so money devaluation flows into a purely speculative asset and
less into home prices or other goods
    Explains lack of regulation, which will come concurrently
    — Christopher Cole (@vol_christopher) March 31, 2021

Said otherwise, cryptos now represent some $2 trillion in excess
liquidity that would otherwise be invested in housing or stocks,
making both of these respective asset bubbles that much more prone to
bursting, and bringing the entire asset-bubble dependent
socia-economic and financialsystem closer to collapse. However, thanks
to bitcoin, there is a substantial buffer allowing Powell to keep
printing indefinitely.

This benign side effect of bitcoin which paradoxically allows the Fed
to perpetuate its ultra-easy monetary policy for much longer,
"explains lack of regulation" although once we hit hyperinflation and
bitcoin goes offerless, regulation will come for one simple reason: it
will be tantamount to deleveraging the system by trillions in a
heartbeat (recall the market cap of all crypto assets is now above $2
trillion) and rising.

    Regulation of crypto is a structural risk to investors/speculators
    Regulation of crypto can be seen as 2nd order monetary tightening
tool by Gov to tame inflation
    All of the above doesn't invalidate ownership of the asset but
requires deep thought on risk-reward
    — Christopher Cole (@vol_christopher) March 31, 2021

This is a sound warning for bitcoin bulls, but it only applies when
inflation gets truly out of hand, but that is unlikely to happen until
lat 2022 or early 2023 assuming the Fed keeps rates at zero and barely
tapers as it has been predicting it will do. That's nearly two years
of upside potential for the best performing assets of the year,
decade, century and millennium.

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