Regulators Are Paying Attention to Bitcoin
Posted onYou bought Bitcoin because it was private. Now you have to check a box on page one of your IRS tax forms and show the government you have holdings.
What’s next from regulators?
Well, it turns out that central banks are going to create their own digital currencies! And not use Bitcoin.
Yes it’s true.
In recent months central banks have become increasingly engaged in digital currencies. They know they run the risk of becoming irrelevant if they don’t control digital payments – so they are working to create their own.
Central banks don’t want to cede control of the digital currency world to Big Tech firms – like the Facebook offering Diem (formerly known as Libra). Here are just a few examples of how central banks are getting into the digital currency action.
Central Bank Digital Currencies (CBDC) projects are going forward all across the world. Here’s a few examples:
- The Bahamas launched its CBDC, called the Sand Dollar, in late 2020. The Sand Dollar is a digital currency issued by the Bahamian central bank for use across the country via an app.
- The Bank of England is creating a settlement service to support a CBDC. It awarded Accenture a $200 million contract to build out a new payments service.
- The Bank of Japan appointed its top economist to oversee research on developing that nation’s CBDC.
- China is testing its digital yuan. China recently gave away $3 million of its digital currency, the e-yuan, through a lottery to its citizens. “Winners will receive a so-called “red packet” via an app containing a maximum of 200 yuan of the digital currency. A hundred thousand of these red packets will be distributed,” according to a Dec. 6, 2020 CNBC article. Those who receive the digital yuan can spend it on JD.com’s online shopping platform.
- Sweden is testing the e-Krona.
Don’t expect the Federal Reserve to be far behind.
Where does that leave Bitcoin?
Former Trump advisor Gary Cohn told CNBC he thinks the world will have a global cryptocurrency that is not Bitcoin.
“In my view, [Bitcoin] is not scalable, is not secure, is not decentralized, is not a currency, and remember, many central banks, starting now with the Chinese one, the Swedish, but even the eurozone, are starting to think about creating a central bank digital currency,” Nouriel Roubini, a professor of economics at NYU’s Stern School of Business said. “Once you have a central bank digital currency, every individual can use an account with the central bank to do payments.”
Legendary investor and Quantum Fund co-founder Jim Roger says if cryptocurrency succeeds in being used as money, instead of primarily for speculation, governments will intervene, making it illegal in order to stop its use.
For this reason, “I believe that the [value of] virtual currencies represented by Bitcoin will decline and eventually become zero,” Rogers said. “It is hard for us to move money without the control of the government. The government wants to know everything. Controllable electronic money will survive, and virtual currencies beyond the influence of the government will be eliminated.”
Central banks are now getting into the digital currency game. Does that spell the death knell for Bitcoin? Maybe. The experts warn that it might and Bitcoin could go to zero.
The evidence is building that if you’ve invested in Bitcoin, the time is right to liquidate, take your profits (while you still have them) and move to gold. Or, at the very least, scale down on your Bitcoin position.
You can then shift those profits into the other asset that central banks around the world continue to buy and hold – physical gold.
Gold. It’s in the midst of its own historic bull run – it’s an intrinsic store of value, a safe haven during crisis and a true hedge against the U.S. dollar and inflation.
We hope this Bitcoin article series has been useful. If you have questions, comments or would merely like to discuss this topic, please call a Blanchard portfolio manager today at 1-800-880-4653.
Part 1: Bitcoin Captures Imagination of Future Space Tourists
Part 2: Bitcoin at All Time Highs – What’s Next?
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