Cryptocurrencies

Trump and Others Scared of Cryptocurrency Echo Earlier Fears About Cash

If there’s one thing government types can agree on, it’s that nobody should be allowed to buy and sell stuff without permission.

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A big problem with cryptocurrencies, President Trump said last week, is that they help people evade government controls on their transactions.

"I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air. Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity," the tweeter-in-chief complained in a jab that applies just as much to paper money and coins.

Just as politicians seem to unite in fear of people buying and selling things without permission, the rest of us should be brought together in recognizing that what scares governments about cryptocurrencies—and cash—is exactly what's good about the stuff.

And politicians really are awfully united in their disdain for anonymous and unapproved trade. "Facebook has announced a plan for a crypto currency platform which appears to meet the needs of drug dealers, human traffickers, tax evaders, and terrorists," Rep. Brad Sherman (D-Calif.) harrumphed recently in response to Facebook's announcement of the Libra payment system. Libra actually doesn't seem to lend itself to such uses, but Sherman covered himself by calling for all cryptocurrencies to be banned.

Earlier this year, Texas state Rep. Phil Stephenson (R-District 85) proposed stripping digital transactions of their anonymity in a bill that, thankfully, seems to have quickly died. In a rare example of snoopy global amity, French lawmakers fretted almost simultaneously about "[cryptocurrencies built] to ensure complete anonymity."

This has been going on for a while. Back in 2014, Sen. Joe Manchin (D-W. Va) already schemed to ban Bitcoin, on the grounds that "the virtual currency that is unregulated and unstable, and has been used in illicit activity, including drug trafficking and money laundering."

"A large part of it is used to facilitate tax evasion and a huge spectrum of criminal activities," said Harvard University's Kenneth S. Rogoff, former chief economist of the International Monetary Fund, in a 2016 interview calling for ditching another anonymous means of exchange: cash.

"Paper currency," he said, helps contribute to "drugs, corruption, human trafficking, etc." And yes, he knows that dumping cash limits people's ability to engage in unmonitored exchanges. To him, that's a plus.

"The government's right to tax, regulate and enforce laws trumps individual privacy considerations," Rogoff said.

It's obvious that complaints about cryptocurrencies blend almost seamlessly with concerns about traditional currency. Both offer the potential for direct transactions free of intermediaries and oversight. The debate isn't about bitcoin, or cryptocurrency, or cash and coins—it's about whether we should be free to live unmonitored lives.

Cash is "printed freedom," is how Lars Feld, a member of the German Council of Economic Experts, rebutted a colleague who called for the abolition of cash as a blow against black markets and tax evasion.

"Abolishing cash would hurt consumer sovereignty—the free choice of citizens about their payment instruments," German central banker Carl-Ludwig Thiele has warned, citing Fyodor Dostoyevsky's observation that "Money is coined liberty."

Notably, Feld and Thiele live in Germany, where memories are all-too-fresh of regimes from which many transactions were best kept hidden. They have good reason to understand that submitting to government surveillance of their day-to-day economic lives can be dangerous. Even if today's government is more benign than the Nazi and communist regimes of days past, it's not completely harmless. And there's no telling what rulers of the future might do with records compiled today.

"For many Germans… the use of cash has, to a surprising extent, become a proxy for profound concerns about trust, privacy, and the role of the state," Bloomberg reported last year in a piece that also noted that the country's residents are "enthusiastic users" of Bitcoin.

That Trump and company invoke "unlawful behavior, including drug trade and other illegal activity" as among cryptocurrencies' sins only makes sense if they offer the same objections to cash. To object to one means of exchange on such grounds necessitates objecting to the other.

Besides, Germans, Americans, and people everywhere who turn to cash or cryptocurrency to preserve their privacy owe nobody apologies because somebody else uses it to engage in "illegal activity."

Not to mention that the words "illegal activity" cover a lot of ground here. For those of us who have seen some jurisdictions legalize long-demonized marijuana while others turn gun owners into overnight felons, it's obvious that the term, in this case, just refers to the prejudices of whichever band of political bandits has temporarily gained control of the law-making apparatus and wants to ban trade in disapproved goods and services. If there were actual victims who could file complaints, the government wouldn't need stepped-up surveillance.

Cash and cryptocurrencies also let people exclude private intermediaries from their transactions, as Andrea O'Sullivan pointed out for Reason in February. Banks and other payment services "can flat out refuse to clear any transaction at any time. Maybe they maintain a blacklist of parties or goods for which they will not transfer funds. In the past, governments pressured companies to maintain blacklists. These days, we are seeing more intermediaries build blacklists of their own accord based on things like the political values of their employees."

Basically, cryptocurrency extends the freedom that cash gives us to engage in deals without seeking third-party approval. If Trump and other busybodies don't want us to have the freedom to buy and sell without their approval, that's an indictment of them, not of our chosen money.

NEXT: Before Bashing Big Tech, Politicians Should Visit an Apple Store

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  1. And one overlooked biggie – fees charged to consumers for transactions.

  2. Amen. Governments – by which I mean the sort of people who feel competent and authorized to tell everybody else how to live their lives – fear and hate freedom.

  3. “The government’s right to tax, regulate and enforce laws trumps individual privacy considerations,” Rogoff said.

    Public enemy #1?

    1. Mainstream view among Republicans and Democrats.

      The only group of “Americans” who have a license to shield their privacy and international financial transactions via aliases and non-reporting are “undocumented immigrants”. But I’m not hopeful that that privilege will get extended to all Americans.

  4. The government should put a tax on cryptocurrency,

    1. How does one tax what is, quite fundamentally, a number? Do you really want to go down the “illegal math” road and see the absurdities at the end of that?

      1. How does one tax what is, quite fundamentally, a number? Do you really want to go down the “illegal math” road and see the absurdities at the end of that?

        Did somebody write the word ‘cryptography’ on a wrench and then hit you in the head with it? You can’t just walk into a store, spout a prime number, and walk out with merchandise no matter how hard the number’s primacy was to elucidate. There has to be a system of buy-in and trust and that buy-in and trust must extend to the system at large. Ultimately, it comes (back) down to trusting the people around you and like you to behave in ways that are predictable and acceptable. None of which has fuck all to do with math.

        How do you create a decentralized standard of exchange without the supposition of force? Either anyone can whimsically centralize it or defy the standard, arbitrarily ignoring your math, or you benevolently bend them back to your clearly superior and more benign mathematics. You’re warning him off of his “illegal math” road by assuming “human behavior = math”.

        1. How do you create a decentralized standard of exchange without the supposition of force?

          How is Bitcoin not doing exactly that? Sure, it has its flaws, but it is decentralized and it is a(n imperfect) medium of exchange; there’s no force involved.

          And yes, it does come down to people agreeing to use it or any other currency. But that consensus does not require force. In countries, the USD is used as a medium of exchange, despite not being legal tender. There is no force being used there.

          1. * in some countries

          2. How is Bitcoin not doing exactly that?

            You didn’t read what I wrote. It’s decentralized but it is in no way standardized. Bitcoin has it’s flaws. It’s biggest is that it pretends to use cryptography to “solve” “problems” that have nothing to do with secrecy or privacy.

            In countries, the USD is used as a medium of exchange, despite not being legal tender. There is no force being used there.

            So then the dollar can and does exist and be used in the absence of “fiat” and the “freedom” offered by cryptocurrency is needless complexity; just as virtual as the currency itself.

            1. Grr… its flaws.

    2. The government has already put a tax on it essentially. IRS treats it as a commodity and you are required to report profits on your crypto trades.

  5. “I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air. Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity,” the tweeter-in-chief complained in a jab that applies just as much to paper money and coins.

    Well, Trump is not a libertarian but rather centrist in his political views. However, since this is pretty much the universal belief of people in both parties, what difference does it make?

    Before even tackling the issue of crypto, the US would have to abandon its draconian world-wide taxation and financial reporting regime for citizens and residents.

    (Well, I suppose you could argue that Democrats at least don’t require worldwide taxation and reporting from “undocumented immigrants”, but that’s just political cronyism.)

  6. Here’s a thought. Let’s just make paying taxes voluntary. In this day and age of micro-payments and the infinite ability to enumerate and characterize everything, how about we put up a giant web site that allows us to each contribute to the things we want to pay for.

    Call it the citizens veto if you’re negative, call it a path to government as a service if you’re not.

    How many government departments will go away if we do this? (hint at a snarky answer – all but a handful). How much happier will we be with our government?

    1. Why stop at the currency? Why stick with the leader we elected before the existence of the caliphate making the decision as to whether we go to war with the caliphate? Why not ratify the bill to see what’s in it and then immediately repeal it?

  7. [i]“The government’s right to tax, regulate and enforce laws trumps individual privacy considerations,” Rogoff said.[/i]

    I don’t use it often, but I think it is well deserved here…

    Fuck off, slaver.

    1. So not BB then… Oops.
      Where is that preview button?

  8. “The government’s right to tax, regulate and enforce laws trumps individual privacy considerations,”

    There’s so much wrong with this:

    1. Governments have no rights. Only individuals have rights.
    2. Humans can’t give rights, even through a contract. They can give privileges or authority. Humans can only recognize rights that already exist.
    3. Rights can’t come into conflict.
    4. Rights can never be positive, only negative. Nothing has the right to steal.

    1. Mostly agree. Disagree on #3, however. Rights come into conflict all the time. Thankfully, civilized countries have well-settled processes for evaluating and balancing those competing rights.

      For a simple example, you have a clear right to free speech. You can say whatever you want and play whatever music you want on your own property. Your right to do that, however, does not mean that you can play your music so loudly or so continuously that it eliminates my right to use my own property for, for example, sleeping at night.

      1. We mostly agree about #3.

        You have the right to play your music on your property. You have no right to play your music on MY property.

        I can be reasonable about this “trespass” at certain levels, but above other levels, I can be reasonably annoyed.

        If I’m a jerk an insist I can’t hear any noises coming from your property, then I may do so. That being said, all my neighbors are likely going to hate me, and likely force me to stop doing lots of minorly obnoxious things that violate their property rights.

        The very fact that people are social creatures prevents them from always standing up for their rights and being reasonable and forgiving.

  9. […] Trump and Others Scared of Cryptocurrency Echo Earlier Fears About Cash […]

  10. JD is always the best.

  11. There’s a great argument for regulating Libra, Facebook’s cryptocurrency, like a money market fund. In fact, the way Libra is apparently set up, it’s much more like a money market fund than it is like a cryptocurrency:

    “Libra’s value won’t fluctuate wildly because it will be backed by a multicurrency fund of liquid assets, allowing holders to get actual money back.

    The setup looks very similar to the money-market funds that many companies and investors have used to manage their cash since the early 1970s. On top of traditionally fixing the value of their shares at $1 to give them the appearance of actual cash, these funds invest clients’ money in very short-term debt that can easily be redeemed, but still provides some extra return.

    With Libra, Facebook will be earning all of that income. Users of the digital currency benefit only from the ease of transfer. The company believes it could be popular in countries where access to banks remains difficult.”

    https://www.wsj.com/articles/can-facebooks-libra-avoid-regulators-history-suggests-not-11562238727?

    Initially, we’re largely talking about the appeal of this service to users outside of the developed world. It’s initial appeal will be as an inexpensive way to handle remittances to the developing world. I just checked, and Western Union is charging $11 to send $100 to India from one of their in-person locations. If you’re sending money from some wild west location, Brazil to India or from Jakarta to India, I’m sure it costs even more.

    Yes, it would also be a substitute for checking and debit card like services to hundreds of millions of upwardly mobile Indian workers, who aren’t being served by traditional banks. Part of it is that Libra would get around the problem of spotty identification. Would you give someone a checking account if you didn’t really know who they were? Blockchain solves that problem. It’s not so much of a problem here in the U.S., which is why PayPal doesn’t charge anything to send money between two checking accounts in the U.S.

    Anyway, we’re not really talking about a cryptocurrency–we’re talking about a money market account that uses blockchain technology. I’m all for deregulating the liquor store business, but if Facebook wants to open up a liquor store, I don’t see why they shouldn’t have to jump through all the same hoops as everyone else that gets a license–and that doesn’t change just because Facebook wants to call their liquor store an “IT business” because they use a lot of computers.

    Calling their money market fund “cryptocurrency” doesn’t mean it shouldn’t be treated differently from other money market funds either. A money market fund that uses blockchain is still a money market fund. A cryptocurrency isn’t also a money market fund. The only thing standing behind the value of Monero is it’s speculative value and its utility. That’s a cryptocurrency. If they want to regulate Facebook’s Libra like a money market, I’m okay with that. If they want to regulate Monero because Facebook started a money market fund, then fuck Facebook and fuck Libra, too.

    1. I give you people gold.

    2. I agree with this. Blockchain can be used to streamline a lot of financial markets; that doesn’t mean it will turn them all into cryptocurrencies.

    3. Would you give someone a checking account if you didn’t really know who they were? Blockchain solves that problem. It’s not so much of a problem here in the U.S., which is why PayPal doesn’t charge anything to send money between two checking accounts in the U.S.

      Elsewhere you’re good, but here you’ve heedlessly crossed mediums. I don’t exactly have to know who someone is to give them a checking account. I just have to know they’ve got a pile of cash. People (used to) write checks to and receive checks from effectively anonymous corporations all the time. It’s when I don’t know whether they’ve got a pile of cash or not that it’s a problem, but then we’re talking about lending and credit.

      It’s a bit odd that you recognize that a currency is not a money market fund but gloss over the fact that it’s not credit, where secrecy and anonymity is actually counterproductive to the parties involved.

      1. If banks don’t know who you are, they can’t come after you when you bounce a check or fail to pay a credit card bill. That’s one of the reasons why, in the developing world, they’ve relied on prepaid debit cards, prepaid phone cards, etc. If the institution has a hard time finding people if and when they don’t pay, financial institutions won’t extend much in the way of banking services to those people–and they’ll charge them through the nose for what services they get. It’s like a huge chunk of the economy is being forced to pay the exorbitant rates of payday lenders. That’s why Western Union can charge 11% to send money to someone in India.

  12. No government is going to give up control of its currency.

  13. I see a lot of popular misrepresentations about money vs. currency and this article echoed them.

    Money is something with real value. Gold and other metals were not just rare or shiny; they have inherent value to industry. Fiat “currencies” are also money because they’re backed by the US economy, which is quite literally the value of what it produces. Currency, in the financial sense, is a unit of exchange. However, there’s a major difference between crypto, which is purely an exchange currency with no backing, and fiat currencies, which are backed by a nation’s economies.

  14. Big Government cheerleaders hate cash because when all the little people use cash, Big Government spies can’t tell what we’re buying and from whom.
    Plus, cash represents freedom of association and personal choice, two ideals socialist turds hate vehemently.

  15. There are two types of people in this world. The type who wants to be left alone and the type who won’t leave people alone.

  16. Tuccille asks the Orwellian awkward question everyone evades. Any objection to crypto clearly applies to cash. U.S. customs robs at gunpoint anyone bringing cash into These Sovereign States if they make any clerical error filling out obtusely-worded forms in tiny print. Crypto, however, is not so easy for looters to take from X-rayed travelers at the point of a gun. THAT is a palpable difference. Add to it a generalized hatred of freedom of trade and production and you have truth not always pleasant. We need more articles like this one.

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