“Governments will crush bitcoin”

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The great ponzi-bubble is reaching for ever greater heights:

Via the FT:

Governments around the world will “crush” bitcoin before long, according to two of the most powerful men on Wall Street, who argue that the only real value in the fast-rising virtual currency is as a tool for criminals and money launderers.

At a conference in Washington on Friday afternoon, Jamie Dimon, the chairman and chief executive of JPMorgan Chase, noted recent moves to curb the circulation of bitcoin in China and an initiative in Japan to launch an electronic currency pegged to the yen.

These were signs of authorities getting a proper grip on virtual currencies, he said, because “they like to know where the money is, who has it, and what you’re doing with it”.

“A fiat currency is when a government says, this is your legal tender, you have to give it and accept it, and of course the central bank can misuse it and inflate it,” said Mr Dimon, who has sat atop the largest US bank by assets for a decade.

“But what is the use case for bitcoin? You’re in Venezuela, North Korea, you’re a criminal. Great product!” he said, to gales of laughter from a room full of bankers, gathered for an annual meeting of the Institute of International Finance.

Mr Dimon’s stance was endorsed on stage by Larry Fink, chairman and chief executive of BlackRock, the world’s largest asset manager, who likened the price of bitcoin to an “index of money laundering”.

The criminality dimension is big but it’s the anonymous shifting of money that’s the real problem. There are two issues for government in this.

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First, in a global economy of increased outsourcing, freelancing and falling labour market boundaries, BTC is a potential disaster for terrestrial taxation if it becomes widely used enough as currency. Huge numbers of taxpayers will just disappear from the grid. Imagine how multi-national corporations will be able to abuse it for dodging tax. Poof, the money is gone!

Second, what happens when somebody starts lending in BTC? That will be a fundamental challenge to the control of money supply in every nation.

And, if neither of these things happen, and BTC never becomes an interchangeable currency, then what’s its point at all? You could see it as gold but, sheesh, what happens when all that fancy tech goes dark in a war? And with these levels of volatility, how can it been as a “safe haven” in any sense at all?

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So, my question remains, the point at which BTC becomes a regulatory problem is not when is it too big to fail but when is it too big to succeed?

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.