Hey everyone! I haven’t been writing as actively as I would like to. We’ve been busy with some house projects but also just taking in what has been happening the world round. Plenty of things to unpack as inflation surges on, Russia is cutoff from the centralized fiat money system, and the Biden administration releases an executive order involving bitcoin. I’ve probably been boring you to death always writing about inflation and I’m going to save Russia for another day. With that I want to touch on this executive order as a couple people have now asked me about it and the thought of regulations around bitcoin have held many people back.
So, what’s in this big executive order that Biden had to release? A whole lot of nothing! Check out the white house briefing on it here (short boring read). More government committees to oversee other committees that think about what a committee could do.
They mention how the asset class overall has grown tremendously in terms of value and they want to protect us from scams. A lot of talk about how the government needs to do research and needs to figure out how to be a leader in the digital asset space - that’s a positive.
At the end of the day, trying to regulate bitcoin can make it more difficult to use in the short term, but in the longer term I don’t think there is anything they can do to stop it. Harsh regulations would simply drive innovation offshore.
Two things that I thought were noteworthy from this executive order. One was the language the white house used in regards to financial stability and also the mention of a CBDC.
They said their committee will, “identify and mitigate economy-wide (i.e., systemic) financial risks posed by digital assets” and mentioned “National Security Risks.” This is striking to me because they know how fragile the current monetary system is, but you don’t hear them admit it very often! Side note - recently Federal Reserve Chairman Jerome Powell, the guy that has been telling us inflation won’t last, testified in front of the Senate and said, “it is possible to have more than one reserve currency.” Pandora’s box has been opened on the status of the global reserve currency.
The white house also mentioned a CBDC - central bank digital currency. Most people have never heard of this and it’s pretty scary.
This is from their briefing: “Explore a U.S. Central Bank Digital Currency (CBDC) by placing urgency on research and development of a potential United States CBDC, should issuance be deemed in the national interest.”
Most people use a digital form of money already whether it is your credit card, online banking, paying bills. The amount of physical cash has severally diminished and then with covid some places deemed cash as “dirty” and stopped accepting it. What would a world without cash look like? No privacy. Every single transaction can be tracked - did the government approve of that transaction? Financial censorship at it’s finest. Don’t follow the rules and your bank account gets turned off? You can paint an orwellian dystopia really quick! The best part - it still comes with all the money printing and the wonderful inflation our highly manipulated system has awarded us.
I can hear a lot of you saying, bitcoin is digital! Isn’t that the same thing? They are both digital ledgers that simply keep track of where the money is. The big difference is that bitcoin is decentralized. No central authority making the rules. No central authority turning off your bank account. No central authority manipulating your money supply. The bitcoin code has a set of rules and anyone who wants to participate can participate. No censorship. Bitcoin is rules without rulers.
The other side of the coin - bitcoin is also digital, like a CBDC, can it also be tracked? It certainly can. Bitcoin is referred to as being pseudonymous. It is possible to use bitcoin privately but requires a little work at the moment. It will get easier and easier as development on top of bitcoin continues. It is happening at break neck speeds and privacy focused options remain a top priority. The main issue regarding privacy is that we need to give the government all our financial information in order to make an account at an exchange. You then buy bitcoin linked to your identity and the paper trail begins. These financial requirements are called KYC/AML - know your customer/anti-money laundering. These regulations were introduced in 2001 under the Patriot Act after 9/11 in the name of keeping the US citizens safe from terrorism and financial crime. They sell us with the promise of safety as they strip us of our freedoms and privacy.
Conclusion
In 2009, when Satoshi launched the bitcoin white paper, which describes how it works, he titled it: A Peer-to-Peer Electronic Cash System. Notice the word cash. Cash is final settlement. When I give you $20 that is now yours and nobody can reverse or block that transaction. The same goes for bitcoin, but in the digital sphere. When I send you 20 satoshi’s that is now yours and nobody can reverse or block that transaction. Bitcoin is final settlement. The implications of this are vastly under appreciated at the current moment.
Earning bitcoin or buying it from other people is a great way to acquire KYC free bitcoin!