Cryptocurrencies like Bitcoin have hardly been “under the radar”. However, the buzz over the upcoming Libra may have brought it some unwanted attention. United States Federal Reserve Chairman Jerome Powell and President Donald Trump have called for more regulation of crypto.
Now the question is, how serious are they and how much can they actually do?
Powell and Waters Call for Libra Hearings
The US government has largely ignored cryptocurrency until recently.
After Facebook announced the launch of Libra – a new cryptocurrency project backed by a number of organizations – they spoke up. Fed chair Jerome Powell told lawmakers that Libra
cannot move forward unless it addresses concerns over privacy, money laundering, consumer protection and financial stability, according to the Guardian. This echoed earlier concerns by House Financial Services Committee Chair Maxime Waters. Waters earlier asked executives involved in the project to testify before Congress on issues related to security and data privacy.
Libra isn’t the first cryptocurrency that has raised security concerns in government. Cryptocurrencies like Bitcoin are favoured by users for their privacy but can be used for illicit activities like money laundering. Some people consider this an excuse that governments use to try and regulate cryptocurrencies. After all, cash can be used to make anonymous payments and launder money just as easily.
President Trump Calls for Bank Charters
Powell’s comments seemed to catch the attention of President Trump who voiced his opinions on cryptocurrencies the following day.
The US President called cryptocurrencies
not money and
highly volatile and based on thin air in a series of tweets. He also called on Facebook and other companies involved in cryptocurrencies to procure a banking charter. This would open them up to more legislation. It also opens up questions. For example, Libra and other cryptocurrencies have executives who pull the strings. However, being a decentralised currency, Bitcoin does not. As a result, it’s not clear who might be able to apply for such a charter on behalf of Bitcoin.
It is also worth noting that President Trump often confuses tweets with legislation. So far, there have been no legal calls for cryptocurrencies to procure banking charters. If such a call were issued, however, what would it mean?
Can Cryptocurrencies Be Outlawed in the US?
Let’s consider a world in the not so distant future in which Bitcoin is called upon to procure a banking charter. No one answers that call because no one “runs” Bitcoin.
Without a banking charter, Bitcoin could continue to operate like it always has. It’s largely free from legislation. Its users understand that they are neither controlled nor protected.
The government may try to outlaw Bitcoin. This wouldn’t be unheard of, but it would be difficult. Because of Bitcoin’s security and decentralisation, it’s very difficult to “catch people” using Bitcoin. The government could try to outlaw Bitcoin exchanges based in the US but people could simply use exchanges based elsewhere. They might need to hide their location with something like a VPN but those are neither costly nor illegal.
The government may be able to go after Bitcoin miners. Iran has managed this by watching for the electricity spikes that give mining rigs away. That is, they give mining rigs away in Iran. In America, where the average electricity demand is higher, this may not work. Even if it did, the end of Bitcoin mining in America would not be the end of Bitcoin.
How has Bitcoin responded so far? As Powell and Trump were making their comments, the price of Bitcoin dipped from just over US$11.5k to just under US$10k. The price briefly rose again before falling to about US$9.5k at the time of writing.
While the US calls for more regulated cryptocurrencies may be significant for Libra, it probably won’t be for others. Essentially, if the government wanted to make trouble for Bitcoin it couldn’t make much trouble. Bitcoin can’t receive subpoenas and it can’t be taken to court.
Jon Jaehnig is an American freelance writer specializing in Technology and Health. Jon has degrees in Scientific and Technical Communication and Journalism from Michigan Technological University and lives in Michigan’s Upper Peninsula with his wife and cat. For more from Jon, you can follow him on LinkedIn and Twitter.