United States of America President is not one given to diplomacy, Donald Trump speaks his mind and in many ways that endears him with his supporters. Trashing Washington’s well established etiquette and its venerable poise, this president has taken on powder keg topics or issues with breathtaking unruliness. From the trade spat with China or a brawl with Iran to lashing out at a special counsel investigation into 2016 US elections, Trump’s showmanship looms large.
However, for those searching for clues of the exact happenings inside the Trump White House, the twitter rants are a treasure trove. Journalists now seem to prefer reporting on his twitter feeds to official government announcements. Anything he says grabs headlines around the world.
So many crypto-currency enthusiasts and supporters could not believe their luck when the man teared into Bitcoin and the upcoming Libra recently. Trump attacked Bitcoin and claimed the US dollar was the strongest currency before suggesting (or threatening) that Facebook had to establish its own banking charter if it wanted to launch Libra.
As usual, those looking for clues from the twitter rants found this to be quite bemusing but interesting nonetheless. For crypto-currency discourse had until now remained limited to a motley of crypto supporting websites, some tech magazines and on rare occasions, the mainstream media. The bigger media may have been avoiding this subject, possibly out of ignorance or perhaps due to sinister motives. Whichever the case, the effect has been clear and consistent, it suffocated this debate.
So when an unhinged Trump tears into crypto-currency there has to be something much bigger about Bitcoin than the attention it had been getting. Interestingly, the US Treasury Secretary Steve Mnuchin addressed the same issue but was more measured as did Jerome Powell, the chairman of the US Federal Reserve. The two men may have been trying to walk back some of the president’s unrestrained comments earlier.
Nevertheless, it is Trump’s utterances that matter because they are not laced with the usual diplomatic niceties, when he sees a threat he makes sure everyone knows about it.
So what is the threat here anyway?
Apparently the US government establishment believes a crypto-currency like Libra stands a good chance of succeeding and thus possibly ending the US dollar’s global dominance. That is the first clue to be gleaned from Trump’s twitter rants; it is primarily about the impeding loss of power and not the usual money laundering or terrorism funding talk that officials have tried to use to sanitize their alarm.
Bitcoin and Libra are real threats to Washington’s foreign policy and its sanctioning toolbox, the Office of Foreign Asset Control (OFAC). It seems a widely adopted crypto-currency as Libra is promising to be, can potentially nullify the effectiveness of the financial sanctions policy. Facebook and its Libra partners may have taken the unusual step (in the crypto world) of engaging or of trying to submit to authorities first before launching but still this effort is being rebuffed because the issue has more to do with threats to America’s global dominance by crypto-currencies. KYC or AML concerns are just smoking guns!
The second clue comes from the stance taken by congress, a body often at odds with Trump, but seemingly happy to back him on this one. Such unity should be enough to raise stink to any neutral observer. When a polarizing president’s utterances are in sync or are supported by a usually divided congress, it means the threat is real. In fact, a bi-partisan congress has even gone a step further by asking Facebook to halt its march towards Libra launch because lawmakers want to time to study or to have their concerns addressed first. Of course Facebook may not be in a position to adequately address any such concerns. Simply put, congressional leaders do not want Libra to compete with the US dollar period! No amount of glossing over will hide this fact.
Facebook’s blockchain lead David Marcus tried to point out that the US need not be left behind with this technology when appearing before the Senate Banking Committee but lawmakers were unmoved. Their disdain of Facebook and general fear of competition blinds them to a point that any rationale argument in favour of privately issued currency is assailed.
Serving the unbanked
While Facebook is hardly the right candidate to speak on behalf of this industry, Marcus did manage to highlight one important fact, the need to serve those without access to financial services. The world has 1.7 billion people who are unbanked and many more who under-banked and this is has been the case pretty much for years. Some lack a bank account not because there are no financial institutions around them but because they do not trust them or lack the necessary documents needed. A World Bank Global Financial Index survey found that close to 20% of unbanked respondents said they do not trust financial institutions as their reason for avoiding the banking system.
Banking fees as well as accessibility are some of the key issues of concern to those without bank accounts and it these areas where crypto-currencies hold an advantage over traditional banks. One only needs internet access to be able to access or use crypto-currencies, which are also better at making cross border payments or remittances.
These are real life use cases and trying to forestall a US company from providing such services will only result in non-US companies or the difficult to regulate cryptos like Bitcoin filling this void. Crypto-currencies are inevitable, whether privately, anonymously or publicly issued, the world actually needs them.
Government leadership not opposition
Governments need to come to terms with this reality sooner rather than later and embrace this technology. Moreover, efforts should be undertaken to see how these technologies can be integrated with conventional financial systems.
Attempting to legislate against innovation— as the Capitol Hill rumor mill seems to suggest—will be a signal to rivals that the United States is relinquishing its position as the number one hub for innovators. In any case, any such legislation will be akin to putting cart before the horse, it goes against the conventional way of doing things. A new product or an innovation must be given a chance to grow and express itself before one passes judgment. Legislation should only come when there is sufficient information and knowledge about an innovation.
Indeed fear and cynicism might win votes or elections sometimes, but the same should never be used when making laws or government policies which often outlast elected governments. Instead, sobriety must always take precedence, improved efficiency and consumer experience should be the overriding concern.