I’m seeing in the comments that there’s a lot of confusion about what cryptocurrency is and how it works. Let me say first that I’m very impressed. It is a rare and wonderful thing to hear someone say “I don’t know,” and even rarer online, but it makes for much better conversation.

Now a few more thoughts on the subject at hand:

Part of the reason that cryptocurrency is so mind-bending is the question of value. In other words, if the currency isn’t backed by a government (for example, US dollars) or tangible resources, how does it have real value or purchasing power? The unsatisfactory answer is that cryptocurrencies have value because people believe they do. (Much similar to the stock market.)

When people speculatively buy cryptocurrency, they are betting on the fact that people will continue to believe that cryptocurrencies have value. This is dangerous because, as the perceived value swings up and down, people who raced to buy when the price was high are left with tough cookies when the price drops.

For those who understood that buying cryptocurrency was a gamble, that’s a loss and part of the game. But in order for cryptocurrency to rise in value, it requires rising demand, in other words, more people buying crypto regardless of how well they understand it. The hype, the jargon (which bolsters the lie that that only smart and financially-savvy people “get” crypto), this all drives people who often know very little or nothing about cryptocurrency to buy it, thinking of it as an investment rather than a gamble. Often, these are people who can least afford to lose.

As I noted in my post this morning, we’re seeing a race between speculators who stand to gain billions by keeping the crypto arena unregulated and those who stand to lose. Without regulation, cryptocurrencies will leave people vulnerable to predatory practices. The government needs to step in before DC is completely captured by crypto-interests.

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Cryptocurrencies are energy impossible and unsecured rabbit holes. Money and accounting are two of humanity’s greatest inventions and tools and there is no actual reason to reject them. The real problem is the monetary and financial paradigm which has always been alternatively monopolized by either the palace or the private banks. Make the money system serve humanity instead of humanity having to slavishly serve it by integating the new paradigm of Direct and Reciprocal Monetary Gifting into the solely debt based system…and many additional benefits not the least of which could be human and planetary survival will follow on.

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Crypto value has the feel of a religious faith. At first blush, some of those you speak of, "thinking of it as an investment rather than a gamble," come across a little like the kind of people I see crowding the Lotto counter buying 10s of tickets, who have no business spending what little income they have, on "getting lucky" and winning, when all that's happening is that they're spending their grocery money on worthless slips of paper. I've heard it said that the US is the only country in the world whose favorite pastime is >losing< money.

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Crypto is a gamble because it has no inherent value. Yes and no. The US dollar has no inherent value. It is not backed by gold. It is backed by the holder’s faith in the credit of the US government. The risk is that if you hold dollars, the government can tax you without any legislation… it’s called printing money and/or issuing new debt to fund bailouts (which is just a promise to print more money later). For the person who was holding $1000 in a savings account… guess what? From 2020 to 2021 the M2 money supply increased by 27% (!). You might still have $1000 if you believe that inflation = CPI, and all you want to buy with your money is cheeseburgers. If you want to buy a house in a desirable city or a nice car or a diamond engagement ring (anything other than just getting by) you now have 27% less value in your account, around $730, without any congressional vote on legislating that tax.

Gold is a gamble because, while it does have slightly more industrial value for its physical properties than a paper dollar, *most* of its notional value is *not* because of its industrial use cases but because is supply is artificially inflated by central banks hoarding. At any time any major world government could drop the price of gold by dumping some of their supply on the market cheaply.

Crytpo has no inherent value for its physical properties, just like the dollar. It outshines the dollar, like gold, due to limited supply inflation. The government can’t issue more whenever it likes in order to fund wars. Want a war in a Bitcoin world? No money printing to extend a war you can no longer afford like in WWI and WWII. You need to levy a tax just like old times.

Crytpo doesn’t have the small industrial value of physical gold, but where it outshines gold is in its ability to move billions of dollars cross-border, in seconds, for pennies. If the government decides to make private gold ownership illegal (again), try carrying your gold to Canada. Your crypto can be carried as 12 words in your head. Sure they can torture an individual for their 12 words, but they’re not going to extract enough wealth in that difficult and unpopular way to make it worthwhile. Crytpo has financial convenience value that the dollar and gold both lack.

In terms of energy usage, the need to pay for energy to operate and secure some crypto blockchains (eg Bitcoin) is part of what makes Bitcoin so secure. It would cost so much money to enlist enough computing power to have a *chance* of successfully posting a fake transaction that it’s not worth the effort. The proportion of Bitcoin mining that comes from renewable energy is higher than any other industry’s energy mix. Bitcoin can also use spare energy in places far from commercial or population centers (a waterfall in the middle of a jungle isn’t helping provide electricity for a city 100 miles away, but it can mine Bitcoin for that city’s infrastructure projects).

In terms of regulation, Bitcoin should be regulated and taxed like other assets. I’m not a crypto anarchist. Regulation will make more corporations and sovereign wealth funds feel more comfortable jumping in, which will be good for Bitcoin and Crytpo in general. Bitcoin isn’t a currency. It won’t replace the dollar. That’s a losing argument and a good way to ensure the government tries to kill it. It’s an asset. If you buy something with Bitcoin that’s denominated in dollars, that conversion is a taxable event. That’s not how a currency works. Bought $1000 of bitcoin, now you have $10,000 and you want to buy a car with it? You’ll need to pay tax on $9000 profit when you sell it to execute the transaction. That’s how an asset works, just like your house. Don’t want to incur tax? You borrow against your Bitcoin as collateral just like you’d take a mortgage against your house, then use the borrowed funds to make your purchases while still owning the Bitcoin.

Anyway, Crypto has value for its functionality. Some cryptos are more likely to remain valuable than others because they have better, less copy-able functionality and/or a larger more decentralized network (more secure, less concentration of wealth). Even with Bitcoin’s wealth concentration, it’s still much more decentralized than other asset classes (and lots of early wallets with their million bitcoins are probably lost forever due to complacency based on their low value 10 years ago).

There can never be more than 21 million bitcoins.

The M2 money supply inflated 27% from 2020-2021.

Inflation isn’t CPI.

Any choice to invest, or not to invest, is a gamble.

Don’t assume you understand the risk of doing something (or not doing something) based on a soundbite.

Take a couple of hours to read a book about it, whether it’s crypto, stocks, options trading, gold, real estate, index funds, whatever.

Study, take a deep breath, and make your own choices.

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Billions of dollars can be hacked by North Korea and other bad actors and spent, and there is no way to get it back. We are building up our enemy's capability to destroy us with bitcoins and other crypto currencies because we cannot freeze their assets like we do with gold or dollars. You put a dollar in your leather wallet in your pocket, it is there until you spend it. you put a dollar in your Crypto wallet, and it is in some else's pocket until it is stolen, embezzled or you try to spend it.

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Digital Wallets (I'm using an umbrella term for places people often store their crypto though they go by many names) have been hacked there has not yet ever been a successful hack of actual bitcoins. This sounds like I'm splitting hairs but it's an important distinction. If I put my money in a bank and the bank gets robbed it doesn't mean that money is insecure it means that the bank is. Currently digital wallets don't have something like the FDIC. Here is a place where regulation could come in handy and the government could have some control. If the government offered a FDIC like service to Digital Wallets as long as they agreed to be regulated Most crypto would in affect be regulated over night. But only to crypto stored in a digital wallet that agreed to play by the rules. There would still be wallets that refused to or people who just choose to keep their keys to themselves.

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There hasn’t been a successful hack of someone’s crypto account (their private keys). Keys have been stolen in scams, but those were still willingly given. Exchanges have been hacked, but that wasn’t through wallet hacking either.

The government stole 27% of the value of that dollar in your wallet between 2020 and 2021 by expanding the money supply. This was an unlegislated tax, not voted on by your congressional representatives but unilaterally imposed by an unelected body.

If you keep your crypto on an exchange, it can be hacked or stolen by the exchange in theory, just like a bank. If you take custody of your coins in an offline wallet they are in your pocket just like that dollar losing value.

It is true that you can’t freeze someone’s crypto assets like you can with money in a bank. I guess that’s a feature of money in a bank, not a bug?

Crypto transactions are permanently recorded and can be traced, and that includes the transactions of criminals. I’m not worried about our government’s capability to enforce the law.

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One wonders if the only way to get ahead of this thing is for the Treasury to issue it's own official crypto that has the same kind of official standing as what we're presently using. After all, most of the money we currently use is simply numbers passed among banks backed by the Federal Reserve. Probably just a simple-minded solution, the product of a clueless mind.

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US dollars are traded electronically so they are already crypto in nature but backed by the might and power of the largest economy and supper power military rather than some server in the cyber space of ghosts and hackers.

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I think between you and me we've identified perhaps the strongest legitimate reason for resorting to crypto. It inherently cuts out the middle man - banks. Crypto has all the basic features of banks as a way of parking, saving, and retrieving money with the added benefit of anonymity, the likes of which people find attractive about Swiss and offshore banks. Of course, many people use it that way assuming - unadvisedly - a built-in growth potential not unlike interest. However, they don't comprehend the sketchiness of its reliability and the distinct possibility of a wildly negative interest rate. If the US Treasury could develop something with the features of cutting out the banks and a guaranteed return on investment - because the US government would be using the capital much the way they do with US savings bonds - it may be a workable response - unless the investor is trying to hide money and obscure dodgy transactions. I could be persuaded to consider such Treasury backed crypto a workable option.

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But there are middle men that are losing other people's money. look at today's headlines from Australia...

"There’s plenty at stake. Since Yeo’s appointment, creditors, including ACX clients and Blockchain Global’s directors and management, have come forward with claims they are owed close to $50m.

ACX is not the only Australian exchange to run into trouble in what is – for now – a completely unregulated industry.

Last week, the smaller exchange Mycryptowallet also fell into administration, reportedly owing clients hundreds of thousands of dollars.

Globally, exchanges have proven vulnerable to failure and theft; Japanese operation Mt Gox collapsed in 2014 after someone stole 850,000 bitcoins from it and in 2016 hackers stole almost 120,000 bitcoins from the British Virgin Islands group Bitfinex, which managed to survive and still exists today. It’s not suggested that ACX’s assets have been stolen."

There is no FDIC insurance or government agency to help".

This week, the Morrison government announced plans to regulate exchanges – some time in the future.

In a speech on Thursday to the Australia-Israel Chamber of Commerce, the treasurer, Josh Frydenberg, said the government would consult on establishing a licensing system for digital currency exchanges, together with regulation of businesses that hold custody of crypto on behalf of customers."

The consultation process is due to be finished by the middle of next year, after an election that must be held by 21 May 2022."

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But as I understand it, no middlemen are required to trade bitcoin. I've always understood that as one of its big "selling points." That's what "open source" is supposed to be all about. Buy the software and boogie.

I'll wager people use middlemen for bitcoin because they don't understand it in the first place, are enamored with the notion of an unregulated market, and are convinced they'll make quick millions - or at least, greater profits than speculating on futures.

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Cryptocurrencies, Dollars, Euros, or other currencies have no *intrinsic* value. Their 'desirability' or exchange-value comes from their ability to purchase goods and services.

Bitcoin has higher exchange-value than other cryptos because of several reasons:

a) It is much more widely accepted worldwide, and thus begets much greater trust (and thus desirability or demand) of the people that they will be able to buy with it something that they need or want,

b) Mathematically, the number of Bitcoins that can ever be produced is limited to about 21 million, and thus with limited supply, as more people want to get it, the price of Bitcoins keeps rising. Price drops when there are more sellers than buyers, owing to fears of government regulation, economic conditions, other rising cryptos, etc.

The "risk of loss" in Bitcoin comes from market fluctuations, just as it exists when purchasing land, stocks, etc. IMO, in a fundamentally free-market system, it is near-impossible to insulate the public from loss by any government regulation that does not get struck down as unconstitutional.

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What about the laws on the books about private companies or States not being allowed to issue their own money or currency within the United States of America? Any script, such as a personal check, must be backed by US dollars deposited in an account the check is drawn on. What backs Bit Coins or other crypto currency? Is there a depository of US dollars that can be drawn from? NO! Is there a mountain of Gold, Silver, platinum or other commodity that can be drawn from? No. So where do all those dollars go when crypto currency is purchased. Like buying $100.00 chips in a casino, it is backed only by the word of the Casino you can cash out and get your money back. But what if the Casino goes Bankrupt? The chips become worthless. I would rather hold Gold or Gold Coins that can be easily cashed out at market value as a commodity than some digitized phantom promise from an unknown ghost in the internet. Wasted Electrical power mining the Bit Coins when our planet needs to stop wasting energy and find renewable recourses, not squander them. Bit Coins, like Tulip Bulbs, will fade in value when people see that it is like the overpriced housing market once more housing becomes available. When you try to check your wallet and the post on the internet says, "this site is available to purchase"...Game Over!

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Bitcoin isn’t a currency. It’s an asset. Buying something that costs dollars with Bitcoin is a taxable event (you have to pay tax on the portion of the Bitcoin that was profit). That’s how an asset works, not a currency. Bitcoin shouldn’t replace the dollar, shouldn’t aim to replace the dollar, and doesn’t need to replace the dollar in order to be a secure store of value and an asset. It should be regulated and profits on it should be taxed like other assets.

The Bitcoin network is maintained by 1000s of independent nodes, that’s part of why it’s the most secure and large corporations are starting to buy in. It’s decentralized and not easy to shut down without shutting down the entire internet (which today would shut down the economy).

If you had $1000 cash dollars in your bank account in 2020 you effectively had $730 in 2021… because $270 was converted into worthless tulip bulbs but the government inflating the money supply by 27% that year. (All the while claiming that inflation was only 3% because that was the change in the cost of a hamburger (“CPI”)… but the house you wanted to buy in a desirable city was now 27% more expensive to finance).

The carbon-free waterfall 100 miles from its nearest city is too far away to provide usable power to the city… but it can run a hydroelectric plant to mine Bitcoin to pay for that city’s infrastructure projects. Bitcoin has the greenest energy mix of any industry and can operate using renewable sources that aren’t useful for any other purpose (and hopefully it will evolve more in this direction).

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Like Tesla Stock. issued for an IPO of $20.00, purchased for $22.34 the next day and 10 years later after a split of 5 for 1 and is now worth, on the stock market, $5,800.00. The backer is the security and exchange commission that makes sure the principals, CEO, CFO or Board of directors don't walk away with the money or the company. Right now, North Korea, China, Iran and others are all hacking into wallets and stealing the crypto currencies and using it to buy parts to build missiles and bombs to destroy the USA.

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I like how you liken crypto with a chip from one of ol' Tweety's casinos - just as >my< example! Kind'a makes me wonder which one of those crypto's may be another of ol' Tweety's hustles! You're >absolutely< right! LOL!

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Has it escaped everybody's notice that the US economic basis is not established by the Constitution? Capitalism is a legacy system that has continued by tradition, much like all the laws on the books that derive from English common law. For a good read, see: https://fee.org/articles/the-political-economy-of-the-us-constitution/

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When we pulled in all the Gold Coins, that used to be traded in commerce, and replaced them with worthless paper money, we created the opening for Crypto Currencies. Stability and worldwide acceptance of the US dollar depends on the POWER of the Fed to back up it's printed money and treasury bonds. 150 years ago, we coined US Trade Dollar from .999 pure silver in order to get acceptance of our dollars in Asia. Today they want crisp, new $100.00 bills with water marks and magnetic strips to guarantee the money is real and not printed in North Korea. In 1964 France wanted the 1 billion US dollars, they had in their banks, to be redeemed in GOLD and the USA went off the Gold Standard and all the silver coins we had in circulation disappeared into hoarders and collectors Safe Deposit Boxes and we had a coin shortage and after that only the 50 cent piece had any silver in it at all as silver bullion prices also soared. When Gold was in circulation, the people had the power in their pockets because they held the GOLD and SILVER. With Paper money, the Federal Reserve now holds that power. With Crypto Currency, the Criminals, profiteers and underworld figures hold the power. Our faith in their fiat Money gives them that power. When the computer servers fail, the money will be gone.

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99% of leading economists today back the abolition of the gold standard, and for good reason.

Someone wanting to exchange a paper bill doesn't necessarily care about gold as much as something he/she can use for his/her needs/wants. Trading it for gold just creates another intermediate step to then exchange it for something of real use (like food, clothing, shelter, etc.)

Gold standard made sense in pre-industrial times (perhaps even before 1800) when the available tradeable goods and services were fewer and international trade slow, uncontrolled and unreliable.

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Backed by Gold is different than having to trade for gold. It gives the paper and intrinsic value that can be exchanged for any other currency around the world while still holding value to make everyday purchases. Every place I travel, they take US dollars or they take Gold Coins minted by counties that still mint them or have minted them in the past at spot value. It will only take one big solar mass ejection hitting the earth from our sun to shut down the internet and put our planet in the dark again for years. What would you want in your pocket when that happens? In times of war, the warring factions do not accept each other's currency but will accept Gold through a third party. Crypto Currency is on severs in which country? Could an additional Zeros be added to the "wallet" of anyone through hacking? The 99% of today's economist work for "Wall Street", not "Main Street" where we all live.

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This seems somewhat incomplete. While I'm by no means a crypto expert I would like to point out a few problems with your explanation as I see it. 1) While all crypto currencies have characteristics in common. They probably have more differences than similarities, therefore it's problematic to try to discuss all of them under one umbrella group. For instance some coins have features in place that would make it easy for government oversight - others intentionally have features in place that would make it hard or impossible for the government to control. The pain point to try to control such currencies would be so high that it doesn't seem rational to contemplate. It would be like a government trying to shut down the internet. Theoretically possible but in practice it would cause more harm than help to do so. But as I alluded to above this isn't true of *all* currencies and I feel like this is a nice feature. Do you want a currency that's backed by the U.S. government and it's courts? Excellent here is a currency for you. Do you want point to point exchanges with no government oversight? Excellent there is something for you, just know when you do so it's the wild wild west. 2) I think there is far too much conversation about crypto as speculation and far too little of it as a means of exchange (it's primary propose) - As such far too much attention is spent on it's perceived value than it's intrinsic value. Crypto is hardly alone in this like you mentioned stocks and all sorts of assets are often considered the same. But it leads to what I feel is the biggest bit of misinformation in your explanation. Bitcoin for example, since as I've already pointed out it's hard to speak in general. *has* an intrinsic value that's based on a mathematical formula. I think it was assumed that since the intrinsic value could be computed at any time it would prevent the speculative value from varying widely. That by observation seems to have been a false assumption. Never the less the intrinsic value of bitcoin can always be known. To the best of my knowledge the speculative value of has *never* gone below the intrinsic value. This is where a comparison to stocks falters - A companies stock also has an intrinsic value but different people have different formulas to calculate that - in general professional services will arrive at near the same value that they think a company's stock is actually worth but sometimes they can vary widely. Bitcoin being based on a published math formula should ought to avoid that as an issue.

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Thank you. Can Bitcoin/crypto be changed into currency/dollars? How will crypto affect governments, world order, etc. if it devalues currency/dollars?

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It can but currently this is a (relatively) costly operation and removes many of the advantages of bitcoin. Just like there will always be exchanges willing to convert gold to dollars, there will always be exchanges willing to convert bitcoin to dollars but that's not where things get exciting. When you "convert" bit coin to Paypal, GPay or Apple Pay (for instance.) Things get much more interesting and at least in theory the transactions will be much cheaper. I say in theory because today in practice they all do convert bitcoin into dollars before the purchase but every year there is less and less reason for them to do so.

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Another item in the long list of corruption that permeates this country. I wonder whether the crypto-lobbyists are secretly advising members of Congress and judges about crypto-deals that will enhance their personal wealth. The de facto religion of this country is money worship..

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That god's name is Mammon, and it's passed off as Christian. Just sayin'.

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Interesting read. How do you plan on regulating the use of Bitcoin for ransomware? I work in cybersecurity and see ransomware attacks happen all of the time . If Bitcoin is "regulated", the bad guys will just use a different "unregulated" cryptocurrency. There are hundreds of cryptocurrencies today, I do not see how all these can be regulated. Maybe through the use of a cryptocurrency exchange but there will also always be shady oversees exchanges not based in the U.S. I do think that I big part of why cybercrime is so common is a.) you do not need to know much about computers to carry out a ransomware attack today and b.) poverty. I noticed that many of the people who are involved in cybercrime are from really poor countries. I think it is desperate circumstances that drive people to desperate means. As an example, Russia educated a large number of people in Engineering and Computer Science in the Cold War era. After the collapse of the Soviet Union these people were left without jobs but a technical skillset. This lead to many of them turning to cybercrime for an income. I can almost guarantee that if less people were living in poverty we would see less cybercrime. There are nation-state attackers that will always be there but I think poverty is a big part of it.

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Very good Zach......plausible explanation for sure....reminds me of the U.S. gov't complaining about int'l hackers hacking into U.S. gov't systems. That's like Charles Manson complaining about porch thieves stealing his Amazon package off his porch.

Instead of the U.S. gov't giving billions of tax dollars to billionaires promising to make space vacations and space travel "affordable for all," perhaps our gov't should be investing tax dollars into cybersecurity-for-all.

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I do think one great investment for the U.S. government is simply 4 year degree for all. We have a huge demand for cybersecurity right now but also a short supply of people who can fill the job. Simply just giving more people access to free / affordable education would solve a lot of our problems (including, but not limited to cybersecurity)

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Maybe. But to me, it looks like countries that >actually produce things< are fairing best. Unless I'm terribly mistaken, the US has been a basically service-oriented economy for some time now.

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That's the officials you elect. The "government" is just the machinery they abuse or abolish to permit that to happen. I find such conservative, antigovernment views >highly< disingenuous. Keep electing officials whose campaign platform involves making government less effective, and get the government you can argue should be abolished.

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No one is a criminal where no law exists.

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The U.S. gov't imposing sanctions on other nations has everything to do with the rise in int'l cyber-crime. I am against the U.S. gov't issuing gov't sanctions against any nation because issuing sanctions is an Act of War under int'l law and the Geneva Conventions.

The U.S. gov't is constantly seeking or considering or issuing sanctions against someone as if there are no real-time repercussions for issuing sanctions against others.

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I agree with this. Very true

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Yikes! as if there isn't enough corruption!? I can't wrap my head around the concept of crypto 'currency'. But things were bad enough without it. I hope people who understand this can keep up or even get ahead.

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You want big money corruption? Take a look at the casino of Wall Street, run by giant corporations and the ultra-wealthy who claim the market reflects the condition of the economy but play with it likes its a Las Vegas free-for-all.

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Yet nobody considers gambling addiction as a greater public health crisis than opioids. Gambling is the very >role model< of addictive behavior. It requires nothing but itself for gratification.

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Our technology is outpacing our regulation of it. This is way beyond my field of expertise, but I am very wary of Cashpay and Bitcoin, etc. I foresee that this will be a problem in our economy if we don’t get a tight reign on it quickly. Those who are “in the know” will benefit and leave the rest of us behind. Just one more problem to add to our growing list of complex issues we must confront.

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It reminds me of credit derivatives: ) --One of the most poorly kept secrets in Wall Street's empire of fraud was that credit default swaps were never anything but pretend-insurance.

The credit default swap market was a $60 trillion-plus paper Ponzi-scheme. The Wall Street syndicate claiming to "back" this insurance have nothing more than a few billions of dollars of liquidity apiece.

Given the magnitude of this fraud and the audacity of the perpetrators, this alone is reason enough to abolish the Wall Street fraud-factories, abolish the credit default swaps market, and indeed to abolish the entire derivatives market -- so that the banksters cannot perpetrate a similar crime again in the future.

Credit default swaps were banned in the U.S. for many decades, based upon anti-gambling statutes. However the CDS fraud itself only scratches the surface on the monstrous evil behind this scheme. As I have written about frequently in the past, the CDS fraud is a tool which the banksters have used to perpetrate an even greater crime: the sabotage and destruction of most of Europe's debt markets.

Here is how this particular Wall Street scam operates. First of all, the banksters pile on massive shorting with respect to the credit default swaps of a particular European debt-market. This drives the prices of credit default swaps sky-high.

Meanwhile, the banksters' accomplices in the mainstream media then perform their best impersonation of Chicken Little: "the sky is falling on Greece's economy." At this point the third partner of this illegitimate tag-team chimes in: the ratings agencies. Based on nothing more than changes in credit default swap prices and media rhetoric, the ratings agencies downgrade the debt of these Euro markets -- immediately driving interest rates higher.

This significantly raises the interest payments on these debtor economies, instantly making those economies less solvent. This is then followed by another shorting operation in the credit default swap market, more media rhetoric, and more bogus "downgrades.". And thus the perfect vicious-circle of crime is established.

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Jamie Dimon (CEO of JP Morgan Chase) got it exactly right when he said recently that the true value of a bitcoin is precisely zero.

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Then why does JPMorgan Chase hold BTC if the true value is zero? Please educate me. And what about Wells Fargo?

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And how far will the crypto explosion take political corruption?

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The energy use should be enough to shut it down.

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Good point. That also should remind all that there is a very physical aspect to this klepto enterprise, and those server ‘farms’ should be findable and very much addressable if other regulation is not respected.

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Clearly what America needs is a new financial market wealthy investors can further enrich themselves without paying taxes. Robert, you're 110% CORRECT. The crypto market sucks ass.

I recall how Mega-fool Elon Musk used his Twitter acc't to destroy small bitcoin investors for his own personal kicks.

Wealthy people are always trying to figure out how to avoid paying taxes, despite the fact their wealth was created on public roads, public infrastructure and the backs of the working class. Disgusting how the wealthy try to create "something for nothing" while complaining about the middle class and poor receiving "something for nothing."

TIME: Two Things Crypto Investors Should Know About the Infrastructure Bill President Biden Signed

President Joe Biden signed a $1.2 trillion bipartisan infrastructure bill on Nov. 15 — and it includes some new legislation crypto investors should know about.

The new law will require brokers — aka cryptocurrency exchanges — to issue a 1099-B.

In other words, crypto exchanges will now be required to notify the IRS directly of crypto transactions. “The bill will signify the end of hiding many gains for many crypto investors,” says Grant Maddox, an independent CFP based in South Carolina.

This will in turn create tax reporting challenges for many crypto investors, Maddox says.

For investors who use their own crypto wallet, the information reported to the IRS on the 1099 form will be prone to inaccuracy since the exchanges reporting on trading activity will have a limited view into what these investors paid for crypto in the first place.

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Regulation will be good for crypto, especially the most established ones with the biggest networks like Bitcoin and Ethereum. It will attract additional mainstream corporate investors and sovereign wealth funds who will feel safer putting it on their balance sheets.

Bitcoin isn’t a currency. It’s an asset. It shouldn’t be a currency. Trying to claim it’s a currency that could replace the dollar is a great way to make an enemy of the government. Buying something with Bitcoin whose cost is denominated in dollars is a taxable event. That’s not how a currency works. Bitcoin doesn’t have to be a currency to be successful. It just needs to have a big secure network that provides a safe place to store and easily transfer wealth that can’t be inflated by government money printing.

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When cryptos first came out I saw the problems that would come from this. I looked at it through the eyes of an Internal Revenue Agent, who worked cases dealing with money laundering. We live in a point in time where money and power is god to many in this world.

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In an "Office Hours" several days ago, I asked Mr Reich to comment on "Bitcoin" and the like. His short response at the time was that it's all a Ponzi hustle. He seems to have been planning a more in-depth response that I only anticipated within the context of that discussion. >This< is the response I was seeking.

As to the question:

"All of which raises the question: As the crypto congressional complex continues to grow, how much longer will lawmakers and regulators be able to rein crypto in?

What do you think?"

I don't think it could possibly happen in the current political climate through legislation. I think the only way it could possibly happen >in< this climate is for the DOD to focus on crypto-currencies as a national security threat, and dedicate a unit of their best assault hackers to insure they're aware of all actors in every crypto transaction they can access, and share any suspicious transactions with the appropriate domestic law enforcement agencies along with the IRS, as well as the CIA to investigate and keep abreast of any possible foreign hostile threats. Keep in mind I say that with fear and trepidation. I'm one of the original "who's gon'na protect us from who's gon'na protect us" types.

Then why - you may wonder - would I take such a position. Quite simply, I think crypto-currency is a far bigger problem than common wisdom may suggest, fraught with unintended consequences that few of us - if any - are equipped to imagine. Also, given that government >creates< the market in the first place, why would we permit antigovernmental, private sector forces to devise a market structure that serves their convenience? Why would we let the foxes rule the henhouse? I strongly urge those of us here who haven't already jumped on the crypto bandwagon, and who are either still mystified by or for whom "the jury is still out" on crypto, to think very carefully about this "new and revolutionary" way of doing business. I'd view it the same way anti-vaxxers view a proven defense against the covid. Those with a relatively reasonable and understandable view is that the covid vaccines haven't been around long enough to understand all the consequences of using it. I feel >just that way< about crypto. Not all innovation is an improvement. Not all change is for the best. The private sector is inherently, by definition, self-serving.

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Hi Robert.

I am a (Norwegian) long-time fan, and signed up today mostly to add this comment. (and to support you)

Although I agree on the main intention of this post (that crypto needs regulation), it is cluttered with common misunderstandings I want to address. Because all in all, Bitcoin aids in what you believe in - equality for all. Which I will explain in this comment. It is crucial that well-meaning people with a massive reach like yourself, truly understand the benefits and mechanics of the financial system of the future.

"I should add that simply in order to exist, cryptocurrencies use astonishing amounts of electricity. (The process of creating Bitcoin to spend or trade consumes around 91 terawatt-hours of electricity annually, more than is used by Finland, a nation of about 5.5 million.)"

This is false. Cryptocurrencies that are built using Proof of Work do, but this is uncommon for new cryptocurrencies. Bitcoin is the legacy coin using this method, and the reason for doing so is to protect the network, and incentivize innovation on renewable energy. (Bitcoin power consumption is roughly half of gold mining, and half of powering the traditional banking system). It is important to differentiate between Bitcoin (BTC), and "cryptocurrencies"(anything else).

"Crypto campaign money is now flowing freely to members of Congress (some of it, presumably, in cryptocurrencies – but, who knows?) Congress’s “Blockchain Caucus” now counts 35 lawmakers as members."

Everything is permanently visible on the blockchain. And in the years to come, we will have the technology to easily see the entire origin of funds, as well as AI will be able to trace the flow of money. Transactions that might be impossible to trace now, might be easy to trace in just a few years. So anyone engaging in criminal activity using the blockchain, are likely to get caught in the near future.

Completely anonymous coins like Monero might need to get banned, as the potential to be used in criminal activity trumps most other use cases in my opinion. But Bitcoin transactions are quite transparent.

"Part of the reason that cryptocurrency is so mind-bending is the question of value. In other words, if the currency isn’t backed by a government (for example, US dollars) or tangible resources, how does it have real value or purchasing power? The unsatisfactory answer is that cryptocurrencies have value because people believe they do. (Much similar to the stock market.)"

This is the most important one. The question of value. Similar to how the stock market works, the price of cryptocurrencies goes up based on demand, and how many people believe in it. You compare it to the US dollar, claiming it is "backed by the government", and that is wha gives it value. But does it really? Holding US dollars is a guaranteed way of losing purchasing power.

Ever since Nixon took the US dollar of the gold standard, the differences in society started increasing at an alarming rate. The gap between salaries and productivity. Between rich and poor. And the reason is inflation.

The middle class and above, all have means of protecting themselves against inflation. And inflation is an invisible tax that is mostly paid by the poor.

People who can borrow money, have been able to borrow money with lower interest rates than the average yearly gains in the stock market. Meaning you can borrow $1m at 1.5% interest, and invest in the stock market for an average of 5-10% return. This means you should borrow as much as you possibly can, and invest it in the stock market to increase your wealth.

People living paycheck to paycheck are the ones who end up taking the bill for the wealthy. The purchasing power of their cash is deteriorating every day.

The prices of real estate are ALWAYS going up, regardless of an increase in demand of said property. Why is that? Money printing. Assets with actual value go up in price when money is printed. The value might still be the same, but the price is higher.

Where am I going with all of this?

Bitcoin is a means of fighting all of this. It represents an asset class available to everyone, without requirements. Where the rich might put their money in hedge funds to be less impacted by inflation, getting access to a hedge fund requires a lot of money. The middle class might have savings they invest in the stock market. The poor has none of these options. Except Bitcoin.

As a store of value, like gold, Bitcoin has been the best performing asset since its inception. It has consistently beat gold, stocks and hedge funds, and it requires nothing more than a free wallet to get started. And you can get started with just a few dollars. Anyone can save a few dollars worth of bitcoin every month and start building up their value. The unbanked can use Bitcoin. The poor can use Bitcoin. And the rich are already using Bitcoin.

In terms of energy consumption, Bitcoin mining can be done anywhere in the world. All you need is internet and electricity. Power plants can mine Bitcoin during the night for their excess power, and sell it the next day to offset costs for consumers.

We can set up solar power plants in the middle of the Sahara desert and mine green Bitcoin. Or on a volcano. Or a waterfall in the middle of nowhere. We can utilize green power where there are no people living, which traditionally has been a requirement for usefulness due to the transportation costs of power.

However, right now the crypto space is packed with frauds and scams. Memecoins that are ponzi schemes, worthless art NFTs being sold for millions, presumably for money laundering. And like you have accurately stated, the people who dont have money to lose are often the ones who do. It is the wild west in there right now, and it is hurting all of crypto.

There is no doubt we will be using some cryptocurrencies in the future. We will also be using NFT´s. But not like it currently stands, ridden with scams, manipulation, ponzis and money laundering.


I wholeheartedly agree the crypto space are in dire need of regulation. But dont get them all mixed up. Bitcoin represents a unique opportunity to increase equality on a global scale. It might not be the payment method of the future. But it is a store of value available to anyone, that has outperformed hedge funds, gold, and the stock market ever since its inception.

It is also a means of storing and transporting energy in a sense, and incentivizes innovation for green energy.

Secondary conclusion:

It was Nixon taking USD off the gold standard that skyrocketed inequality in society. Not capitalism directly as we are often lead to believe.

Thank you for reading :)

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I agree! The internet has become a gold rush! No regulation no taxation and all just ones and zeros. They get the ones and we get the zeros!

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Robert, please post and discuss this: U.S. Senate passes resolution to repeal Biden vaccine mandate, with help of two Democrats (Manchin & Tester)


EDITOR: “Look how the Dem-controlled Senate passed this anti-science, harmful, deadly legislation with a simple 51-vote majority. Clearly Democrat Sen. Majority leader Chuck Schumer, Dirty Coal Joe Manchin and Dem. Sen. John Tester are stinking piles of garbage.

Schumer allowed a simple majority 51-vote on deadly, anti-science legislation, but won’t allow a 51-vote majority on legislation that matters the most to Americans, including essential election reform legislation to save our democracy from a crazed, criminal attempt by the GOP to START THE STEAL IN 2022 AND 2024.”

NBC NEWS: The Senate passed a resolution Wednesday to repeal President Joe Biden's vaccination-or-testing mandate for private-sector employers in a bipartisan rebuke of a key component of the White House's Covid-19 strategy.

The measure, which needed only a simple majority to advance, passed in a 52-48 vote.

It was supported by every Republican and two moderate Democrats: Jon Tester of Montana and Joe Manchin of West Virginia.

“I'm not crazy about mandates,” Tester said before the vote. He said later that the federal requirements were “burdensome regulations.”

Sen. Mike Braun, R-Ind., who introduced the resolution, argued that Biden had no authority to impose the requirements. Braun celebrated the vote Wednesday evening.

"This bipartisan vote is a crystal clear message to the @WhiteHouse: Back off, and stop this crazy federal overreach immediately," he tweeted.

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Thankfully the bill will never get past the House and on the odd chance that it does, Biden will veto it. What's with it with the GQP? It's almost as if they're convinced the covid virus is good for America and will fight against any attempt to keep Americans alive. But it's their constituents in red states who are dying, not the vaccinated blue states.

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Premise 1. Crypto is here to stay. Like abortion, or drug addiction, prostitution, or alcohol use, you can call it evil and make it illegal, but you can't stop it from happening, so you have to look at how things play out when it is legal versus illegal and pick the net-better scenario.

Premise 2. Modern currencies are fake in that they represent the market value of a human enterprise (a government) rather than goats, chicken, gold, labor, etc. Crypto is based on less reliable human enterprises, but is not inherently of a different or more fake nature than regular currencies. Mr. Reich and others who actually understand economics should correct this premise as needed. The only difference (and it's a big one) is who is backing the currency.

Premise 3. WIth the world economy being conducted increasingly online, money will inevitably become entirely digital anyway, so who are we kidding? We have to get on top of this, by the name crypto currency or just currency. What do we think credit cards have always been? As a former VP of Engineering for a company that intermediated a lot of banking transactions, I can tell you that it's almost entirely done on computers, with relatively little movement of physical dollars.

Conclusion 1. Crypto can't be banished, so it must be controlled. It's not that different than regular currency, except that it is validated in a distributed free-market manner instead of by central governmental agencies. That is, it *is* capitalism, so capitalism hawks (of which there are presumably none on this forum) ought to shut up and sit down (which is what I want them to do in general), and sane, decent people need to regulate it like everything else that is subject to playing a large role in the abuse of capitalism at the expense of people. (As I say here frequently, capitalism, by its very nature, must be regulated if it is to serve rather than destroy people.)

Crypto is rife with financial danger, is widely used in support of illicit activities, and has a significant negative impact on the planet by way of exorbitant energy consumption. But, the first two of these concerns are addressed if crypto is incorporated into the legitimate banking system (which is not immune to these problems but is at least regulated), and the latter by the selection of the right technology. This is not theoretical. Crypto.com / CRO illustrates this approach with an existence proof that it is possible today -- it is being done today.

Conclusion 2. We are in for a bumpy ride. Fortunes will be made and lost. Banishment will only prolong that agony by extending the period of time during which crypto is non-legal or illegal, hyper-risky, and unregulated. We have to get on it with vigorous enthusiasm rather than run away from it. How it differs from regular currency is who says how much a particular coin is worth. That's just how the stock market works. It's no more radical than comparing the stock market to a currency. We need the equivalent of the SEC.

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It is nice that billionaires can't write off the losses on their crypto currencies but must claim any profits.

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