Unless you have been hiding in your basement, Bitcoin and other cryptocurrencies have been taking a beating in true tulip mania fashion. Over a trillion dollars has been lost from the aggregate crypto market recently. Many ordinary people discover that taking out a second and third mortgage on their home to buy more crypto was an aggressive but bad idea.
At this point of spiraling crypto despair, the Administration recently decided to take executive action to regulate cryptocurrencies and NFT’s. Citing national security concerns, which is a catch-all mechanism for when the government is unsure if they can legally do something, the White House considers classifying these securities assets.
If that happens immediately, the markets will be subject to some of the economy’s most demanding and extensive licensing requirements. Regulatory compliance will become a nightmare for digital currencies that are not pegged to anything of value and can be started in your mother’s basement. What could go wrong?
The Biden Administration may be looking at China, which has been ahead of the curve by being the first country to launch its cryptocurrency last year. El Salvador went a step further and adopted crypto as its national currency (it is not going well). Perhaps Biden is looking to a backup plan for when the United States Dollar crashes and becomes useless as the benchmark currency given the mad race to see who can print the most money. Whatever the reason, it does make one wonder why the Administration would add another problem to its plate of already poorly handled issues.
We have some data points to look at how this would play out. It is a well-known fact that if you have crypto in your portfolio and declare it on your tax returns, it almost guarantees you will get audited by the IRS. There is gold in those hills, and Uncle Sam wants to get his hands on some of it. It is not a question of if, but when attempts at regulation are coming. Biden, it seems, is the President who wants to start the ball rolling.