Steve Mnuchin does not have many fans in the crypto crowd. When Mnuchin started out his term as Treasury Secretary he seemed somewhat ambivalent about cryptocurrency. That changed last summer, however, when Facebook announced that it was planning on releasing Libra. Almost overnight cryptocurrency became an enemy of the people as far as the current administration was concerned, with Mnuchin labeling crypto a threat to national security and President Trump unleashing a tweet storm denouncing it.
We are a bit farther down the road now, and it looks like last summer’s heated rhetoric is set to crystallize into “significant” new crypto laws in the United States, at least according to a statement Mnuchin made last month. At the root of all of this lies the perception of crypto as an easy means of carrying out illicit financial activities, a perception that lawmakers have been trying to hammer home in the aftermath of the Libra unveiling.
But what’s the endgame here? Do American legislators genuinely think that cryptocurrency is a threat to the safety of the nation or is something else at play? To delve into what’s happening and what it all means, we reached out to Changelly crypto exchange CEO Eric Benz to get his take on the situation. We’ve touched on this topic before with Benz, when the government tentatively allocated funds to be used in establishing more firm crypto regulations, but now things have taken on a more serious demeanor.
We started our conversation by talking about control, and whether that was what the government was after with crypto. Benz argued that looking back at history, centralized authorities seek by their nature to accumulate more power. He said, “Like the gravitational force that massive objects wield, whenever and wherever power is centralized it seeks to pull outside structures into itself to control them as well. The more powerful the centralized entity is, the stronger the pull they are going to have on external structures.”
Specifically pertaining to the situation in America, Benz elaborated: “Considering something as transformative as bitcoin and some of these other alternative currencies, it is no wonder that the US Government wants to control circulation. The sheer notion of there being any loss of control especially when concerning the US dollar — immediately there is an element of fear and panic which normally translates into further regulatory restrictions being implemented for the mere purpose of stifling innovation and growth.”
From there we moved on to discuss the way the government has portrayed cryptocurrency in the media. There are legitimate reasons to think that lawmakers are being a little less than honest when they talk about cryptocurrency with such inflammatory language, not least among them the recent report that chair of the Federal Reserve, Jerome H. Powell said that the central bank has been studying what an official US digital currency would look like.
According to Benz, “When it comes down to brass tacks, any law or regulatory requirement is in some form or another a means of control. The main problem we have with Bitcoin and other currencies which follow suit is the fact that it is very difficult to track and also control considering there are no borders with crypto.”
This is not to say that Bitcoin and other cryptocurrencies are only used in above the board ways, a fact that Benz readily admits. In Benz’s view, “Just as we have seen over the previous decades, technology will always be used for good as well as bad. In fact, many of today’s technologies that we depend on were born out of a need to do something ‘bad’ or perhaps considered ‘bad’ by government bodies or other central authorities. Over the years we have begun to unravel the complexity which has been built up over many decades and blockchain technology along with cryptocurrencies is re-inventing exactly what it means to build a decentralized ecosystem. When we see regulators making announcements about new rules and laws being proposed to ‘improve’ blockchain technology it really is a means of stifling innovation, which could in turn lead to an entire shift in global economics.”
We then considered whether the ramping up of hostilities in the traditional sector could lead to a more pronounced break between the world of crypto and that of traditional finance. Benz thinks that this is somewhat inevitable, but not a bad thing, per se. In his view, “There will always be a battle between ‘church & state’ or in this case ‘Centralised vs. Decentralised’. This notion of implementing total control while still providing independence has come to a standstill. Established institutions and government departments across the globe have all worked so hard to provide the ‘control’ and give us people the ‘opportunity’ to live and co-exist in some version of peace and harmony.”
However, Benz continued, “As nice as this might sound, it's utter bullshit and for the first time in our short human history we finally have the ability to operate and live within communities completely self-sufficient and not reliant on any central authority. It will continue to be a difficult road to achieving complete decentralization but the important thing is we have started and there is no turning back.”
One of the other more interesting aspects of this situation is the central bank looking into minting a US digital dollar. We asked Benz how he felt about government-issued digital currencies and whether or not they had a place in the crypto industry. Benz likened them to stable coins, saying: “National cryptos or in other words, ‘stable coins,’ absolutely have their rightful place in this new era of decentralized services. The institutions understand just how important national cryptocurrencies are, considering it gives them a better sense of control for the crypto ecosystem as a whole and makes them more relevant in years to come, otherwise they really do run the risk of losing that ‘national’ control.”
Looking forward, Benz predicts, “Over the coming years we will see BTC and other altcoins grow exponentially, however, national ‘pegged’ cryptocurrencies will also be relevant as it will be imperative to provide as many rails both into and out of the existing financial institutions as possible in order to really stimulate growth and reach mass adoption.”
As the regulatory situation in America continues to change, the rest of the world is undoubtedly paying close attention. As the largest economy in the world, what happens in America tends to set the tone for other countries. Be sure to follow our coverage as this situation develops.