Bitcoin has no value. Can Central Bankers Kill Bitcoin?

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The central banks of Russia, the United States, England and Japan all have choice words to say for Bitcoin: … [+] it is worthless and their bank’s digital currency will be better. Can these people ultimately destroy Bitcoin?

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The powers that be are increasingly demanding greater and centralized control over everything from health care to money. Decentralization is waging an uphill battle. As centralization and decentralization come up against it, could it be that central banks, the controllers of money flows, could possibly make a move to kill the grandfather of all decentralized finance: Bitcoin?

That’s right, no central banker likes Bitcoin (BTC).

This week, the People’s Bank of China said it was of no value.

Bitcoin and other cryptocurrencies “are not legal tender and have no medium of real value,” Deputy Director of the Financial Consumer Rights Protection Bureau of the People’s Bank of China said on August 27. , Yin Youping, in the local Chinese language press.

On August 13, the Central Bank of Russia called it a technological financial pyramid system. Bank of Russia First Deputy Governor Sergey Shvetsov likened buying Bitcoin to “stepping into a minefield” and said the local exchange should not list companies that trade in Bitcoin (think the local version of Coinbase).

A month earlier, on July 18, Bank of England FinTech Director Tom Mutton said a digital fiat would be much better than a dumb Bitcoin. Bitcoin, given its underperformance and energy inefficiency, is by no means a relevant comparison for the kind of technology we might use in a central bank digital currency, Coindesk said.

On July 16, Powell said in testimony to Congress that the federal government’s ongoing research into a digital dollar would likely render Bitcoin obsolete. You wouldn’t need stablecoins, you wouldn’t need cryptocurrencies, if you had a digital dollar, he said.

Two months earlier, Bank of Japan Governor Haruhiko Kuroda had said Bitcoin was essentially a casino chip used for highly speculative gambling, er, investing. And no one pays for Bitcoin purchases. No one really uses Bitcoin as a means of settlement, he told Bloomberg on May 28.

I cautioned against Bitcoin being engulfed by globally coordinated central bank action to pull it off the market. Of course, that would make Bitcoin prices go up quickly, but when the world’s major central banks are racking up all the Bitcoin, then what? Again, what’s stopping them from banning it?

Perhaps this is why John Paulson, a fame-claiming hedge fund manager called the 2008 real estate bubble, believes Bitcoin (and altcoins) to be of no value either. He said this on Bloomberg TV on Monday, for subscribers only.

“Cryptocurrencies, no matter where they trade today, will eventually prove to be worthless. Once the exuberance wears off or the liquidity dries up, it will go to zero. would not recommend anyone to invest in cryptocurrencies, ”he said.

Retail investors with a Gemini account hate to hear this. They bought altcoins from blockchain projects that no one even really uses except computer dorks and gamers. Yet 10,000% gains in coins like Dogecoin have turned people into true believers. Maybe all this is worthless. But in the short term, spin that wheel.

In the long run, however, the biggest risk for Bitcoin in particular is the Fed, PBoC, Bank of Japan, etc. They clearly have no use for Bitcoin. They also don’t want competition for their digital fiat currencies.

Bitcoin faces some competition from central bank digitization programs. But regulators can be … [+] even more headwind, potentially putting a weight of lead around the propulsion engines of this famous Bitcoin moon launch.

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Who is worried?

All governments, including the United States, want their people to use their national currencies, says Jason Blick, CEO of EQIBank and President of EQIFI. He says this is due to the economic principle known as seigniorage, which allows the Federal Reserve to print dollars at a value significantly greater than the cost of printing the money in the first place.

The challenge with seigniorage is that it fails if people don’t use the money you print. In small countries, like Argentina and Iran, this has become a big problem as alternatives, such as Bitcoin, have created an underground economy caused by a lack of confidence in the national currency, Blick says. This seigniorage problem is very real in many countries, which is why governments are often tempted to impose bans on digital assets. But I don’t think this will ever happen in the United States, given the dominance of the dollar.

Some people are even a little optimistic if a digital dollar or the digital renminbi (RMB) is truly deployed. It has already been tested in parts of China.

If the Federal Reserve launches a digital, compatible dollar on the channel, then that will be a positive sign for BTC, Ethereum and other cryptocurrencies, thinks Sainath Gupta, CEO of Knit Finance in the British Virgin Islands. They are found in the multi-blockchain liquid packaging, bridging and staking space for the decentralized financial niche of crypto. I think it will then be an easier and more reliable bridge for institutional investors, retail investors will be afraid to miss out, raising the prices of crypto all around, he says.

Centralized digital currencies don’t really pose a direct threat to Bitcoin, believe many players in the blockchain and crypto industry. The reason is that their regulators and their goals of existence are very different. Unlike Bitcoins, a digital renminbi, or digital dollar, is issued by a central authority. Bitcoin’s decentralized structure, volatility, and limited supply mean that most countries classify it as an investment in commodities. Therefore, the demand for Bitcoin does not correlate with the demand for government-issued digital currencies.

Bitcoin is really at the mercy of banking regulations, especially anti-money laundering laws, says Adnan Haider, CEO of Regal Holdings LLC. Prior to Regal, Haider was responsible for fixed income and equities in the Treasury and Investments division of a major bank in the United Arab Emirates. He was also a former director at Barclays Capital in credit derivatives trading and corporate finance, so he is familiar with traditional banking systems.

Most central banks, when their executives aren’t trashing Bitcoin, are still looking to establish regulations with the Securities and Exchange Commission, for example.

Crypto investors are waiting to see what regulators say and if they will be allowed to exist. Governments have yet to figure out how to properly regulate the industry, so it’s likely that sooner or later we’ll hear more intense regulatory action from government agencies around the world, he says.

On August 30, Roslyn Layton, a senior contributor to Forbes in Denmark, wrote the United States Securities and Exchange Commissions lawsuit against cryptocurrency innovator Ripple Labs in December 2020 received a lot of feedback from aficionados of crypto. During the pre-trial phase, Ripples’ legal team put the SEC itself on trial, she wrote, after years of conflicting and confusing guidelines on cryptocurrency rules. No one expected the tsunami of legal, political and social actions from retail cryptocurrency investors outraged by the betrayal of an agency purporting to protect their interests. The SEC’s collapse of credibility with this $ 2,000 billion global investor community exposes a costly SEC miscalculation.

These are the regulatory issues for crypto. It cuts both ways.

For China, they have always hated Bitcoin. But remember when they told Bitcoin miners to shut down? Well, they’ve come back on.

BTC has been a minor but public nuisance to the Chinese government for years.

Xi Jinping is not a fan of Bitcoin.

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Beijing has always maintained a cautious view of anything that could impact national financial stability. It is committed to removing any unregulated and volatile digital assets traded, used and invested by the Chinese people, Blick said.

So when the China PBoC denounces Bitcoin, what else is new?

Their main target is the dollar. Their digital RMB is designed not only to defeat Bitcoin, but marks the start of a long-term journey to eliminate the dollar’s dominance as a global trade currency, especially in Asia. The consequence of this will inevitably lead to a short-term panic sell of BTC, Blick says.

For Haider, these are just whines and groans from the central bank for now. Your Bitcoin is always safe.

The rise of digital assets will continue to disrupt traditional finance. Whether you’re in the pro or anti-crypto camp, what’s clear is the disruption digital assets have when it comes to payments, cross-border transfers, and currency markets, Haider says. I see the coming years as an important era of transformation. This is why we are seeing the emergence of central bank digital currencies as well as global regulatory and tax bodies trying to maintain control of this ecosystem.

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