Elon Musk is the least of Bitcoin’s problems

William Pesek is an award-winning Tokyo-based journalist and author of “Japanization: What the World Can Learn from Japan’s Lost Decades”.

If Bitcoin enthusiasts think Elon Musk is ruining their party, wait until they have a load of what the Chinese Yi Gang has in store.

Yi heads the central bank of the world’s second-largest economy. Until recently, China was the epicenter of cryptocurrency mining – and the broader optimism that this nascent “asset class” would decentralize financial power everywhere.

A slew of government restrictions in recent years – including bans on initial coin offerings – has driven most crypto mines elsewhere. Yet the real threat comes from something that Bitcoin’s bulls initially viewed as a sign of buying: China issuing a digital currency.

May has been a devastating month for crypto mania, especially Musk’s switch to Tesla accepting Bitcoin. The world’s most enigmatic tech innovator making a $ 1.5 billion Bitcoin bet drove securities into the stratosphere like a SpaceX rocket. News Musk had suddenly stumbled across crypto – after receiving a comment from environmentalists – landed hard in the market.

Tesla became the first major company to really get close to Bitcoin – and to step back in horror at learning what’s inside the blockchain sausage. How can you buy or sell an $ 80,000 product when the value of what you are paying could go up or down 20% an hour later?

Enter Governor Yi’s People’s Bank of China, which is building a digital yuan right now. The contours of the PBoC coin first appeared in mid-2020. Since then, the crypto bulls have tried to make this a win. Here is the future largest economy in the world indicating that paper money is going in the direction of salt, seashells, camels, knives, gold coins and other monetary units of past generations.

The use of cryptocurrency would flourish by osmosis, wishful thinking is gone, as investors started betting on digital bond transactions and stock listings, and e-money transfers shifted from science fiction to factual science. Not so fast, says Chinese President Xi Jinping, who gives Yi free rein to scan quickly.

Could this be the end of the game as China and other governments institutionalize a payments system that leaves Bitcoin, Ethereum, Dogecoin and others outside the transactional world with little to do?

The whole game, really, is accumulating what everyone will need in five years to buy coffee, shop on Amazon and Rakuten, or buy a house. It’s a bit like buying Internet domains – TokyoOlympics2022.com, maybe – that people might one day pay a king’s ransom.

China is calling the time, however. Beijing last week banned financial institutions and payment services from even touching cryptocurrencies. If Musk is a buzzing pest in the market, China just released a giant fly bomb to make Bitcoin’s May month even more cruel.

Janet Yellen too, it seems. Last week, the US Treasury Secretary announced his intention to tax cryptocurrencies. The context for Yellen’s campaign is to generate revenue to fund a $ 1.6 trillion social spending plan. But it does suggest the direction President Joe Biden could take: more brakes and more regulation of this Wild West universe.

Yet even Yellen’s attempt to treat the market like an adult is ludicrous. Transactions “with a fair market value” over $ 10,000 will soon be reported to the tax authorities. What is “fair” value? It’s entirely possible, given the epic price volatility, that a crypto user buying an Apple iPhone could get the attention of the Internal Revenue Service if the cost suddenly rises.

That says all about the absurdity of our time that the most cutting-edge ideas come from actors. Exhibit A: The recent Ponzi-crypto-is-an-environment-kill-scheme by HBO’s Bill Maher. As Maher said: “What you are hoping is for someone else to come and pay you more money for them later. But then that person has the problem. In terms of value: zero . “

The question now is whether Yi’s team at PBOC grants any role to private cryptocurrencies in the conventional payment system. If governments unite to trace, tax and regulate Bitcoin and supplant its transactional utility, what good is it?

PBOC Governor Yi Gang pictured in September 2019: The question is whether Yi’s team grants any role to private cryptocurrencies in the conventional payment system. © Reuters

Oddly enough, Musk, while playing with Bitcoin, highlighted his biggest flaw. When a random, vague tweet from an erratic CEO can create or destroy hundreds of billions of dollars in perceived wealth, you can have a tail wagging crisis in your hands. You may also be considering a decision by the Group of Seven Nations or the Group of 20 to end the crypto-party.

Narendra Modi, India, is not the idea of ​​an economic innovator. But the authorities could try a version of the demonetization of the Prime Minister in 2016. This bet, by which India suddenly withdrew all major currency notes from circulation, aimed to fight against black money which allows money laundering. money, tax evasion and terrorist financing.

The harder it is to monetize something that your computer processor has “mined”, the more a cryptocurrency becomes the financial equivalent of an Internet troll. It’s a sign of our disorienting age where celebrities, entrepreneurs, and sneaker enthusiasts can simply create a non-fungible token, or NFT. Or the business version: make a Special Purpose Acquisition Company, or SPAC. Why work hard to get an initial public offering when you can bamboozle investors with a PSPC deal?

As Beijing strives to create a PBoC coin, the easy days for the crypto world may already be over.

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