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In 2008, the backing reserve was basically houses. In cryptocurrency, I’m quite serious about this, the backing reserve is gullibility.

It sounds like you’re saying, one, crypto is all nonsense, but, two, the nonsense will continue indefinitely, because as long as you can invent money out of thin air, you can find a sucker to buy it. Unless governments step in to say you can’t do certain things anymore.

Yes. The good news is, there’s regulation coming. Treasury is looking at this stuff very closely because they basically have to make sure that these crypto bozos cannot screw up the actual economy where people live. And they would absolutely screw it up, because they’re idiots. And they got a taste of that in 2019 when Facebook did its Libra cryptocurrency, or tried to, and every regulator, central bank, and finance ministry in the world said, “No, you are bloody not.” Because Facebook didn’t know what they were doing and they were really arrogant about not caring that they didn’t know what they were doing. So basically, about a month later, the entire US government, Democrats and Republicans were united in this, squashed it like a bug.

So on the regulation question, are we talking about something like, if you have a stablecoin, you actually have to be audited and prove that you really have a dollar for every one of these stablecoins that you say is backed by a dollar?

That sort of proposal, yeah. There’s various versions of this, like requiring that stablecoins be issued by actual banks that are highly regulated and so forth. There have been proposed laws to this effect. None have passed, but these ideas are very much in the air.

The thing is that the regulators are reluctant to move too fast, and also they have restricted enforcement budgets. But I’ll tell you who really wants to regulate crypto: the money laundering cops. FinCEN are absolutely humorless cops who don’t care if they crush your business. And internationally, the FATF, who set rules that regulators are advised to follow if they want their country to be allowed to do business with anyone else. Those guys have put in a bunch of rules that came in 2021 about making crypto transactions more traceable. I think we’re going to end up with some sort of two-speed crypto market. You’ll have the entities that are known exchangers where people are traceable, and changing it back and forth to actual money is relatively easy, and then there will be another market which runs high on crack and is just incredibly unregulated and has a much harder time getting to the precious US dollars.

Most people don’t own any crypto, and yet you have Fidelity offering Bitcoin in 401(k)s, you have Wall Street institutions investing increasingly in crypto. How much could a crypto collapse affect the broader economy?

The main thing you have to worry about is that these bozos really want to get their tendrils into the world of real money. I think for a lot of them, that’s the endgame: get it into people’s retirement accounts. Now, the Department of Labor actually issued a notification in March warning financial advisers not to tell retirees to put their 401(k) into crypto. And Fidelity went and offered this product anyway. They really, really want to get into important products, because that way, when it collapses, they’re looking to the government becoming the bag-holder of last resort. And this is something to be fought against strenuously. It hasn’t happened yet, but we need to fear it.

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