It’s been a whirlwind week in the cryptocurrency world. There have been a rash of news items all pointing towards the same thing – attempts to rein in alternatives to the future of central bank digital currencies (CBDC) that are quickly creeping up over the horizon.
It started with the CFTC’s indictment of the owners of crypto-exchange BitMex after more than a year of investigation last week.
Even if its founders are not convicted, this might still spell the end of the embattled BitMEX. In tandem with the criminal indictments, the CFTC also launched a civil action against the BitMEX network of companies and its founders.
The formal counts on which the CFTC seeks relief are:
- Executing futures transactions without registering with the CFTC
- Offering illegal off-exchange commodity options
- Failure to register as a futures commission merchant
- Failure to register as a designated contract market/swap execution facility
- Failure to supervise in relation to its lack of KYC and AML procedures and failing to ensure that its partners and employees lawfully handled BitMEX accounts
- Failure to implement KYC and AML procedures as required under the CEA
That put a lid on a nascent rally in Bitcoin which was beginning to challenge $11,000. The net result was a $500 move down and killing any potential short-term bullish momentum. It should have seen a breakdown below support at $9800 (orange line, see chart) but that didn’t happen.
Since then Bitcoin has been bouncing around between $10,400 and $10,900 without any real direction, continuing to coil and consolidate.
But despite the violent intra-day reaction Bitcoin weathered that news item well, with last week’s volatility dropping off to next to nothing.
You Can’t Win
Today the market shrugged off two major pieces of news from officialdom. The first was the U.K.’ Financial Conduct Authority banning the sale of all products that move with the price of crypto-assets.
The Financial Conduct Authority said there is “no reliable basis for valuing cryptoassets” that act as the underlying for derivatives and exchange-traded notes.
The FCA had already alluded to the idea in a public consultation on the industry last year and the regulator claims it the ban will save retail investors $69 million. The ban is scheduled to take effect on January 6, 2021.
The FCA further claimed there is a, “lack of legitimate need to invest” in products like Bitcoin.
What I want to know who determines where the legitimate needs of investors lie? I thought that was supposed to be up to investors to assess the risks and make their bets.
I guess they are now only allowed to invest in openly rigged markets like U.K. Gilts because that serves the legitimate needs of a U.K. government in serious financial trouble.
What’s clear from this move by the FCA is that the U.K. and City of London are far more worried about further leakage of funds out of their nigh-criminal Ponzi schemes and into the world of cryptocurrencies they have little to no control over.
This is another tell, just like the Fed intervening deeply into the TIPS markets at the end of Q3 to mask that real interest rates have been rising, that there is groundwork being laid for a seismic shift in the monetary system due to the continued deterioration of asset price supports post-Coronapocalypse.
Martin Armstrong has been warning crypto-enthusiasts, like myself, for a long time that governments would move to make them illegal to own and/or transact in.
And I don’t disagree with Martin. Here is an open example by a major government regulator to stymie competition to not only the existing failing monetary system but also to the one they have planned to replace it with.
The ECB is obviously accelerating their digital euro plans with the latest move to trademark it.
The European Commission recently published a comprehensive 168-pages draft proposal on how the digital assets can be integrated into the European legal framework. The document covers various aspects of the new financial tool and touches upon the benefits of the central bank-issued digital currencies (CDBC) over the fiat money.
Notice how that new ECB report talks about the benefits of a central bank digital currency, but never the downside, because the benefits are all to them.
You Can’t Break Even
It’s the same shuck and jive Attorney General William Barr is doing by having the U.S. Attorney’s Office issue its guidelines on digital currencies called Cryptocurrency: An Enforcement Framework (full text at the link above).
I skimmed the rules and the justifications for this legal framework and all it does is list the reasons why private cryptocurrencies are bad. We all know the drill — money laundering, financing terrorism, tax evasion, sanctions evasion etc.
Given that we can’t seem to go more than a week without another major bank getting a slap on the wrist and a fine for laundering hundreds of billions of dollars, usually for some intelligence agency, again I have to wonder why should the private crypto-world be any different than the supposedly legitimate one.
The problem with all of this is that when government intervenes in any market it creates both the incentive and the profit opportunity to evade that intervention.
The mere existence of Bitcoin and the muti-hundred billion dollar equivalent cryptocurrency market is damning evidence of government malfeasance as a steward of our money.
But we’re the criminals in wanting to avoid the worst of their bad policy?
Of course, the real criminals are the ones that lie, cheat and steal by managing the monetary system badly but for their benefit. Which is why their enforcers, like Barr and the FCA, have to step in and tell us how they will prosecute us for wanting something better or outright make it illegal to make a market in them via futures and options.
These rules are an open admission that the current system is failing and the Bitcoin and the tokenization of assets collectively known as DeFi — Decentralized Finance — are real threats to the ultimate power of the their state apparatuses.
These rule systems are designed not to protect investors and consumers but to protect the existing beneficiaries of the existing system and whatever they are planning next.
And what they are planning is their version of Bitcoin, but with none of the trust, privacy, or lack of counterfeiting and counter-party risk that Bitcoin and other private cryptos offer.
In fact, they will be the exact opposite of this with absolute chain-of-custody, zero-privacy, and ability to be seized from a holder’s account for whatever reason they deem appropriate.
You Can’t Get out of the Game
In a time when politics is so divisive people are literally cheering the unpersoning and deplatforming of people they disagree with does anyone really think those drunk with power in D.C., Westminster, Beijing or Brussels wouldn’t use the new power afforded by a non-convertible digital cash for the most extreme political leverage?
Every day that passes as we approach this election in the U.S. brings the story of the Great Reset more sharply into focus. And that future looks a lot like the world depicted in Steven Spielberg’s Minority Report but without the three precogs.
That film’s future was designed in consultation with ‘all the best experts on where we were headed’ in terms of surveillance, technology, robotics, everything. And who do you think Spielberg, a Davos man if there ever was one in Hollywood, consulted?
It surely wasn’t the underground cryptography enthusiasts guys like Neal Stephenson was hanging around with when he wrote Cryptonomicon and The Baroque Cycle (highly recommended as the last decent things Stephenson wrote before he too was infected with the shitlib virus after spending too much time in Seattle).
That was a future in which a person became an unperson in the time it took for one person to issue a command and press a button. It also was a world envisioned before the advent of private, trustless digital currencies like Bitcoin.
And therein lies the difference in how we move through this next period of history.
There is no doubt in my mind today that the Great Reset of the World Economic Forum is in process and that nothing — not Brexit, Bitcoin or the re-election of Donald Trump — will stop the attempt to pull it off.
Because the System of the World (as Stephenson called it) is failing. The cost of maintaining the illusion of prosperity dwarfs the return on the investment in it. This is why we are drowning in debt and why the system has, for all intents and purposes, stalled.
Regaining the Reactionary Gap
What is happening is happening in real time, right in front of us as the powerful move to protect themselves and work through their plans to set up their neo-feudal Utopia.
I don’t know that they’ll pull it off and I sincerely hope they don’t because that’s a world too terrible to contemplate. But what I do know is that the harder they push the harder the push back will be.
Because while they can manipulate the Overton Window and the rules of engagement the laws of physics they can’t repeal. You know the one I’m talking about, Newton’s Third Law – for every action there is an equal and opposite reaction.
And while Newton may have been the most famous Master of the British Mint who re-established the legitimacy of Britain’s coinage the irony is his doing so allowed the Bank of England to get established and touch off the Era of Central Banking.
Today Bitcoin is the natural reaction to the end of that era, where Central Banks have been exposed as running immense Ponzi schemes which have created the conditions which have the world teetering on the edge of systemic collapse.
Will it and those that are building its parallel infrastructure be the ones who ultimately reboot the System of the World when this latest attempt to retain control fails?
Or will we muddle along for another generational cycle under the boot heel of venal men?