Kryptonite Cryptonite

ABERDEEN, SCOTLAND – Let’s have a little rummage through the postbox as we end for the week…

I received many responses to Red Collapso last week. As bitcoin rises in value, the question of how governments will respond to it becomes a matter of “when” rather than “if”…

You ask: “Is the government gonna maul British bitcoiners and drive them out of the country, or let them prosper with a little oversight?”

In reaction to a major incident of unequivocal crypto fraud, Western governments will act in unison to close down all crypto currencies.

It in their interests to tackle tax evasion and steer investments into financing government debt.

As I’ve argued in previous letters, the digital asset space is as close as it gets to the Wild West of investing. If you could pack a Bowie knife and a six-shooter while you were exploring it, you would, for there are plenty of bad actors prowling this frontier who will loot you for everything you’ve got if you let them.

There have been all manner of unequivocal crypto frauds in the space over the years (some more memorable than others) – though not of the scale I think this reader is suggesting.

Considering the amount of attention now on the crypto space, it does seem probable that a large crypto scam might be seized upon by a government official to pursue an anti-crypto agenda. Whether they’re successful of course is another matter – especially if you want to win the millennial vote, which is becoming a larger proportion of the electorate with every passing day…

Would government restrictions on the likes of bitcoin actually be effective? One reader has doubts:

The UK government has a very poor track record when it comes to involvement with IT and probably doesn’t understand Bitcoin fully yet and will do nothing for a while, but I do think HMRC will start to investigate people for CGT especially those who use social media to tell the world of their huge gains…

For me personally I believe the true value to governments lies in getting to grips with the potential of blockchain. Used fully, it has the potential to revolutionise world trade and to make the current Brexit border paperwork shambles history.

Hear, hear. Far too much of the government narrative on technology in general focuses on the sector as a honeypot ripe for taxation, and not as a tool to reduce bureucracy and increase transparency. I’m not sure we’re going to see that change anytime soon though…

A few months ago I read a book called ‘Moneyland: Why Thieves And Crooks Now Rule The World And How To Take It Back’ by Oliver Bullough.

What this described was the colossal extent of world-wide corruption and out and out crime, often either connived with, if not actually operated by, foreign regimes is taking place.

I believe that, in the event that governments try to assert regulation over crypto, then new crypto exchanges and new crypto-banking and crypto friendly bank accounts will suddenly appear in these off-shore crime …er… tax havens.

I’ve yet to read Moneyland – but it is on my list. You’re right that in the event of widespread and restrictive crypto regulation, crypto liquidity would flood towards areas less restrictive.

It’s worth pointing out that there are already plenty of crypto exchanges and nouveau riche “cryptonites” based in the likes of Cayman and Bermuda already, however. Hell, the organisation that issues the digital dollar known as Tether does its banking in the Bahamas.

One reader is thinking of moving to a crypto-friendly state in preparation for a crackdown on crypto wealth:

I’ve already left the UK to gain a second residency (if not citizenship) in ******* and depending on how the government here reacts to CGT on crypto, I may well drag my little family over to Panama and/or Portugal to gain very easy residency and again, possibly citizenship – the latter two are totally tax free on crypto and that looks like how they’re wanting to attract high net worth folk – which I wasn’t beforehand, but the rate we’re going with crypto, I may well be far wealthier than ever before…

I hadn’t thought of Portugal as a crypto-haven before – though I do know many readers of this letter live out there. A happy coincidence indeed!

There is nothing of advantage in the present crypto currency construct for any government.

A national digital currency (NDC) however, is another matter entirely. Instant taxation with instant payment of all taxbills (even if those bills are just plain wrong), nationwide tracking in real time of ALL money movement and, of course, they control the ‘off’ switch. Bliss for the government (especially the socialist state-control of everything numpties) and if you think state manipulation of the current fiat money is bad, wait ’til you see the eye-wateringly stupid ideas our esteemed politicians will dream up with a NDC to play with. And – of course – they will outlaw crypto currencies (big fines) and the holding of gold (confiscation) and slowly – so as not to frighten the people too much – eliminate paper money and coins which you will have to hand in in exchange for NDC. Too late we will realise the single biggest flaw of ANY digital or crypto currency -there is nothing you can hold in your hand, nothing that is yours.

Welcome to the brave new world, it’s a-coming.

P.S. …how about a ‘shiny’ of sovereigns?

A “shiny” has been added to the list! I’ll need to make an infographic at this rate…

I’m getting a bit jittery about Bitcoin for all the reasons you have written recently.
I do know the difference between pure speculation and the loyal “never sell” brigade who truly believe that crypto in general will be main stream currency sooner rather than later, however I first bought a little Bitcoin back in 2016 and have seen many amazing rises in value as well as deep troughs, but my gut is to take a little profit now…

There’s no shame in taking a profit – especially if you’re leaving some on the table. Always be wary of those who demand total loyalty to an investment thesis, for they are wearing ideological blinders. In environments like these, you want to keep your peripheral vision as sharp as possible: keep them wingmirrors polished.

Wishing you a good weekend,

Boaz Shoshan
Editor, Capital & Conflict

Category: Investing in Bitcoin

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