The following editorial appeared in the Cumberland Times-News, CNHI newspaper. It does not necessarily reflect the opinion of The Tribune-Democrat.
The continued adoption of cryptocurrency by governments, businesses and nonprofits such as the March of Dimes – which recently announced it would take donations in the form of cryptocurrency and non-fungible tokens to meet its $500,000 fundraising goal – further ties in the world of paper money to that of the digital.
It’s a complex space that United States government apparatuses such as the Securities and Exchange Commission have shown much interest in, but little willpower to build formal regulation around. Individual states have taken the whole array of approaches to lawmaking around cryptocurrency.
Cryptocurrency is defined as a digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank, to uphold or maintain it.
Maryland’s Department of Labor, Licensing and Regulation has issued various warnings about cryptocurrency – that since it is not regulated by the state, there’s the chance of “untoward behavior.”
Meanwhile, during this year’s legislative session in Arizona, Senate Bill 1341 was introduced which would make Bitcoin a legal tender in the state.
The number of global crypto owners is expected to reach one billion by the end of 2022, according to Crypto.com.
Too often, however, it seems the people peddling cryptocurrency are offering a mystery bag of unlimited potential in exchange for a few bucks.
And, too often, that bag is just empty.
The SEC has already gone after two companies, Telegram and Kik, for, in essence, printing their own money – minting digital currency – when they decided they needed to finance their companies.
There is no inherent value in a cryptocurrency. There is no inherent value in fiat either. In a physical sense, it’s technically just paper.
Although, there is a sturdier backing for what the government prints. After all, the government does collect taxes, provide services, has the power to throw someone in jail or prison for breaking its laws and wage war.
This fact, and the desire of some investors for more stability from their cryptocurrency, has given rise to the idea of a stable coin, which is digital currency with some real world asset to back it.
Tether, based out of Hong Kong, supposedly uses the dollar as its attached asset.
According to an article in “The Verge,” the company started out called Realcoin with the stated goal of having a one-to-one backing by the dollar; however, in 2019, it changed to “Every tether is always 100% backed by our reserves, which include traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties, which may include affiliated entities (collectively, ‘reserves’).”
In 2019, the New York Attorney General’s Office investigated Bitfinex, a partner company to Tether, and found that it had been covering up losses.
New York Attorney General Letitia James said, “Tether’s claims that its virtual currency was fully backed by U.S. dollars at all times was a lie.”
Tether lawyers then admitted it was only 74% backed. Various releases from the company since have even put that number under scrutiny.
Basically, it appears as though Tether makes coins as it decides it needs them. The concern for investors is that hypothetically if it’s not backed like they say and a run on the coin were to happen, many could end up not getting their money back like they expected when investing in the ‘stable’ coin in the first place.
That’s not to say the basic idea behind block-chain technology is not valuable. Certifiable digital code – we’ll call them “digital fingerprints” for ease of use – that can verify that a thing is what it purports to be, is and will be useful as our lives become increasingly digital.
Anyone can say anything on the internet. It’s rife with misinformation.
An academic paper that could receive a certifiable thumbprint from a well-regulated academic system would be useful for sorting through the sea of wash.
At the moment though, it’s hard to see most cryptocurrencies as little more than a digital age multi-billion-dollar pump-and-dump scheme.
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