The administration's anti-cryptocurrency policies risk alienating voters of both parties. But the bigger picture, although this too may be misguided, may be about maintaining America's global economic power.
Posted May 14, 2024 at 12:52 PM ET.
David Z. Morris is a longtime technology and finance reporter. black marketa newsletter about cryptocurrencies, financial true crime, and systemic corruption.
For the first time, cryptocurrencies have become a major issue in a US presidential election, as Donald Trump and Joe Biden face off in the run-up to the November general election. But what appears to be a domestic political failure by Democrats may actually be about preserving America's global banking hegemony.
The risks are rising rapidly.made by trump Cryptocurrency advocacy comments at Mar-A-Lago Last week, Bitcoin appeared to reverse its previous position that… “It's a fraud against the dollar.” A recent Harris poll sponsored by Digital Currency Group found that: 20% of US voters Think of cryptography as an important issue. Just this morning, Bitcoin Magazine reported comments from longtime Democratic Party funder Mark Cuban, who said the Biden administration's anti-crypto stance is a possibility. Biden cost the election. Against Trump.
Read more: 2024 is the year of the biggest global election in history, but what does that mean for cryptocurrencies?
The immediate cause of the surge in cryptopolitics is the Biden administration's announced intention to veto the SEC's rollback of Staff Accounting Bulletin 121 (SAB 121). Accounting guidance requires banks to treat digital assets held on behalf of their customers as if they were their own assets, so even if the asset cannot be used, a 5% discount on its value will be deducted. It is required to be held as additional reserve capital. Because it belongs to the customer. (Thanks to Castle Island Ventures) matt walsh, was the first to sound the alarm on SAB 121. )
This makes cryptocurrency storage economically unviable for financial institutions and amounts to a backdoor ban on cryptocurrency storage imposed without legal or administrative procedures. Because SAB 121 is “guidance” rather than a formal regulatory “rule,” it has not gone through the standard public comment and review process for new agency regulations.
Read more: Crypto owners switch from Biden to Trump ahead of November election, Paradigm poll finds
As Rep. Tom Emmer (R) has argued, this rule accomplishes the opposite of the SEC's statutorily stated goal as a government agency: revitalizing the digital asset market. . High concentration, low equity, low security. The effects of this rule include pushing crypto custody services to less established, higher-risk players, including offshore, the type of custodians likely to be the next FTX.
“Chokepoint 2.0” and democratic censorship
It doesn’t take much imagination to see that making cryptocurrencies less secure is indeed the goal of Mr. Gensler’s leadership. This is another pillar of the Biden administration's continued efforts. “Choke Point 2.0” Critics say the goal is to prevent virtual currencies from being integrated into the U.S. financial system without clear legal authority to pursue that goal. That effort includes enforcement actions, including Mr. Gensler's failed effort to block Bitcoin ETFs and a series of issues targeting reputable exchanges such as Coinbase.
The nickname “Chokepoint 2.0” is key to the skeleton of partisan politics at play here. The original Operation Chokepoint was an Obama administration effort to pressure banks to do business with industries such as gun manufacturers and payday lenders, essentially increasing scrutiny of banks that do business with these industries. This was done by threatening.
Read more: Donald Trump promises never to allow CBDC if elected president
Even if you respect the initiative's goal of shrinking socially undesirable industries, it was a deeply flawed idea. Operation Chokepoint was deemed an abuse of agency power by the House Oversight Committee and was halted by the FDIC in 2015. The FDIC has settled several lawsuits as a result of this program, and new limits on its authority have been imposed.
Remarkably, the original Obama-era chokepoint was essentially designed by: Martin GruenbergAs the current director of the FDIC, he also plays a key role in Chokepoint 2.0.
The world politics of weaponized finance
The use of banking levers to attack an undesirable but legitimate industry reflects two distinct factors in American politics. Democrats seem more willing than Republicans to use banks as a cudgel against domestic undesirables, especially cryptocurrencies. But in recent years, the United States as a whole, including under the Trump administration, has dramatically stepped up its use of the financial system as a weapon against global adversaries. At both levels, these policies pursue short-term tactical gains at the risk of uncertain and potentially damaging long-term strategic losses.
Not surprisingly, the SEC and the Biden administration's abuse of financial regulation to target legitimate American businesses has drawn criticism, primarily from the conservative right. These are broadly defined “freedom” voters who don't particularly like the idea of being told what to do by unelected regulators.
But as Nick Carter in Castle Island pointed out, it's unclear who is on the other side of that equation. There is no major constituency dedicated to anti-cryptocurrency policies. The 19% of Americans who own cryptocurrencies are split almost evenly between their political affiliations. 21 Democratic Party membersMeanwhile, he joined Republicans in supporting the House bill that would overturn SAB 121.
One possible explanation for the Biden administration’s willingness to pick this losing domestic battle is that their real focus is on the threat cryptocurrencies pose to U.S. global banking hegemony. . This far-reaching power, including US oversight of his supposedly neutral SWIFT interbank system, was recently explored in a book by political scientists Henry Farrell and Abraham Newman. The Underground Empire: How America Weaponized the World Economy.
Farrell and Newman explain that nearly all global financial transactions at some point pass through U.S. banks and rely on the U.S. dollar. This gives the United States immense control over these transactions, and it has used that authority more aggressively in recent years, including with its dramatic decision to freeze Russia's foreign exchange reserves in response to the invasion of Ukraine. It is used for
But Farrell and Newman note that this is a short-term tactic. The more the United States tightens its control over the financial system to punish its adversaries, the more they will have an incentive to establish new payment channels that do not affect U.S. infrastructure. Control. Efforts by BRIC countries to build alternative trade payment rails have stalled, but they remain strong.
But that is not the real nightmare scenario for U.S. financial power. China settles crude oil transactions in renminbi — The growth of viable crypto infrastructure will make uncensored payments accessible and attractive to everyone around the world.that way Unleash transformative growth This can be done by removing economic barriers, but it would also undermine a major pillar of American power.
Perhaps Biden's current politicization of finance will be useful if the administration intends to foreground this set of motivations: to see the crypto crackdown not as an attack on the freedoms of the American people, but as a preemptive effort to curb it. If it can be marketed as a positive move, it will be more palatable to American voters. Enemies include Russia and China.
However, even here, such long-term international operations often have to be carried out in secrecy. If Biden publicly declared something to the effect of “America controls all the money in the world, we know it and we want to keep it that way, so we're anti-cryptocurrency.” , that would be an unacceptable conflict. Rather, it will likely further provoke US strategic adversaries to explore cryptocurrencies to circumvent US power.
So American voters, including many liberals, will continue to think of something akin to domestic financial authoritarianism from the Biden administration. For the 20% of American voters who think crypto policy is important, that may be about as appealing as policy. dog-faced pony soldier.
