I keep reading articles like this. Yet another bureaucrat calling for the regulation of cryptocurrencies. They never seem to learn.
The article opens with several disturbing facts:
The French minister of the economy, Bruno Le Maire, has announced the creation of a working group to develop cryptocurrency regulations…with the objective being to prevent the technology’s misuse.
First, I did not know that France had a minister of the economy. This one fact goes a very long way in explaining the lackluster French economy.
Suppose you were put in charge of the economy of your country. Would there be any way for you to do your job that did not involve monitoring and regulating the moment to moment activities of just about every person living in and visiting your country?
Everything anyone does effects the economy. Sitting on the porch enjoying the sunset means they aren’t renting a video or going to the theater or enjoying some “retail therapy.” Every moment to moment decision to do something, whether it ends in spending money or refraining from spending money, aggregated over the entire population, results in the set of metrics we then call “the economy.”
How does one “regulate” something that is based on the most minute decisions of every person in the country? This cannot be done by even the most repressive dictatorships in the world.
This alone should make it obvious that an economy cannot be regulated.
After thinking it over, the typical bureaucrat comes to the only conclusion possible: Fine, we’ll regulate the production side.
So they have to monitor and regulate the moment to moment activities of just about every person doing business in the country.
Yeah. That’s a whole lot easier.
Ok, so they’ve put some poor schmuck in charge of the economy of France. We already know the powers-that-be didn’t pick these people from the deep end of the intellectual pool. Just to prove that point, Bruno says he wants to regulate cryptocurrencies.
There’s already been a lot written about the possibility (or rather, the impossibility) of regulating cryptocurrencies. Check out this article for what countries have been able to do so far. The only actual regulations have been aimed at the exchanges. The exchanges operate at the border where the crypto world meets the fiat world — and the regulations apply, as expected, to the fiat world.
The most popular form of “regulation” is the warning that ICOs (Initial Coin Offerings) “can be risky.” Gee, thanks for that. I never would have known.
Here in the US, the Securities and Exchange Commission (SEC) thinks ICOs are securities, and thus fall under the jurisdiction of, you guessed it, the SEC. Their reasoning is that ICO could be fraudulent — so the SEC needs to get in on the act.
Could this be the same SEC that regulates the industry in which Bernie Madoff operated? The Bernie Madoff that worked a Ponzi scheme for years that bilked investors out of sixty-five billion dollars. The same SEC that was warned on at least four separate occasions about the Madoff operation and did nothing? The same SEC in which, after the Madoff scandal was finally exposed and we learned that this was the largest, longest running fraud in American history and that the SEC took no action even after being alerted to the scheme, no employee of the SEC was hanged, quartered, imprisoned, charged, fined, or even called on the carpet?
Yeah, that SEC!
Why not? What could go wrong?
So even if regulation of cryptocurrencies was possible, would it still be something we, the investors of cryptocurrencies, would be clamoring for? No? Why not? The stated purpose of regulation is prevention of money laundering and protection from fraud. Don’t we investors want to be protected from fraud?
Sure, but who will protect us from the regulators? Besides, if we listen carefully to the regulators, they will tell us the real reasons they want to regulate cryptocurrencies.
Back to Monsieur Le Maire:
“We want a stable economy. We reject the risks of speculation and the possible financial diversions linked to bitcoin.”
Here we see that the man placed in charge of France’s economy knows nothing about economics.
A stable economy is a stagnant economy. In today’s dynamic markets, a stagnant economy is a dying economy. But a stagnant economy is much easier to regulate than a fast-paced, dynamic economy. To a regulator, ease of regulation trumps every other consideration.
Does it really matter that La Maire rejects “the risks of speculation”? Every investor knows that every investment involves risk — and learns it very quickly after first becoming an investor. In fact, the essential difference between an investment and a speculation is the amount of risk involved. We invest in US Government bonds; we speculate in oil wells and gold mines.
So the first point in Le Maire’s statements is true though frightening in its implications. The second point is completely nonsensical. It is the third point, “We reject…the possible financial diversions linked to bitcoin,” that really worries the man in charge of the economy of an entire country.
What can he mean by financial diversions? There are two possible answers.
- Every dollar (or franc, in his case) invested in Bitcoin is a dollar or franc not invested in stock or bonds or any other fully regulated investment. So money is flowing from regulated investments to unregulated investments. Can’t allow that.
- Every dollar (or franc) invested in Bitcoin a few years ago has increased by thousands of percent. For example, the $7000 I invested in 2015 has earned me a membership in the Bitcoin Millionaires Club™. Returns like that simply do not exist in the world of regulated investments. All this money to be made and France (or any other country) was not able to get in on any of it. This, to a regulator, is a problem that must — absolutely must!!!— be fixed.
As a stock, option and commodity investor/speculator with over 30 years experience, do I feel the need for regulators to “protect” me?
Let’s see. In 2015, I started making regular purchases of Bitcoin. About once a month, I would buy three Bitcoin for about $1000. The eighth time I made such a purchase, the exchange notified me my credit card had been rejected. I quickly logged in and checked my account. Plenty of money. What was going on?
A call to the bank gave me the answer. The bank, in all its infinite wisdom, was now refusing to make payments to cryptocurrency exchanges. This was for my protection, doncha know?
I recently calculated that the bank “protected” me from earning another million dollars. Gee, thanks Mr. Banker. I really owe you for that!
Dear Mr. Regulator: cryptocurrencies, by their very nature, cannot be directly regulated by you. However, I realize this will not stop you from trying — with results ranging from total futility to making an absolute mess of things. If government regulations (French, American, any government) had a reputation of actually helping the average citizen of that country, I probably would welcome your attempts — for more than their comedic value, that is. Until you have built such a reputation, however, please leave us alone and stay out of our way. Thank you.
P.S. If you really need to regulate something, regulate asteroid strikes. One of these has the potential to end all human life. Can’t let something like that go unregulated, now can we?