QUESTION: Can you please answer the important question that everyone is wondering about? If we go to a digital currency then what will become of bitcoin and all of the others? I am thinking that they would not want the competition and would then outlaw all other cryptos. Can you please share your thoughts on this?
ANSWER: I have been warning from the outset that cryptocurrency is by no means something that is remotely close to what the marketing was all about. It is not a safe alternative to the dollar, central banks, or anything else. It has been subject to confiscation as in the latest $1 billion seizure.
The U.S. government seized an unprecedented $1 billion worth of bitcoin linked to Silk Road, which the government alleges was run by Ross Ulbricht, who is now serving life in prison after being convicted of running the operation. The “Justice” Department said it was the largest seizure of cryptocurrency in the history of the agency. The London-based blockchain analysis firm Elliptic claimed it picked up on the massive movement of bitcoin instigated by the DOJ. The company reported 69,369 bitcoins — worth about $1 billion — had been moved out of a bitcoin wallet, which had the fourth-highest balance of any in the world.
As I have stressed, Bitcoin is an extremely trackable method of exchange. It offers no real security that the market people have claimed. The U.S. was able to track down those funds through a unit within the IRS that specializes in tracing virtual currency transactions. The IRS agents were able to identify 54 new bitcoin transactions executed by the Silk Road, which appear to be the proceeds of some of that illegal activity. The agency was then able to trace that money to a specific bitcoin address that appeared to have hacked the bitcoin funds from the Silk Road. In a federal court, they do not even need to trace every bitcoin. They trace a small sample and then claim everything is a fraud.
You will find countries outlawing cryptocurrencies and then in the final straw, they will most likely seize everything and then put it into whatever digital currency the government has created at whatever exchange rates they decide which may even be a discount to whatever the fair market value may be. There will be no recourse. Even when Roosevelt confiscated gold, private contracts that required payment in gold were all nullified. That went to the Supreme Court arguing the President could not alter private contracts.
In PERRY v. UNITED STATES, 294 U.S. 330 (1935), the case was of extraordinary economic, political, and legal importance. The government’s outstanding obligations were substantial. The Treasury calculated that the difference between paying in gold and paying in deflated dollars was worth over $50 billion dollars to the government, and the attorney general warned the justices of the U.S. Supreme Court that there would be economic “chaos” were the government to lose the case.
They can do whatever they like. The court held being paid in dollars rather than gold was no loss.