Crypto Surge Sparks Establishment Panic: Bans, Crackdowns, & Fatwas As Bitcoin "Undermines Governments, Destabilizes Economies"

The last few months have seen increasing notice being paid to Bitcoin (and the broader cryptocurrency space) by those that control the status quo.

At first it was simple "negative"-speak - "you"d be a fool to buy Bitcoin"-esque comments spewed forth from the truly ignorant or intentionally-ignorant (this group included bank CEOs, asset managers, payments systems, and remittance services) but to no avail, those fools saw the value of their bitcoins surge... Like the Winklevoss twins...

Then - as the price soared and the market cap of Bitcoin topped that of General Electric and Goldman sachs - the world"s central bankers began to take notice... but in their standard manner, played down any risks, explaining that any systemic fragility "was contained" since cryptocurrencies were not big enough (this group included various Fed presidents, Bank of Canada, Bank of France, Bank of Japan, Bank of Korea, and so on all echoing similar phrases)... even though Bitcoin is now the 6th largest currency in circulation...

But this week has seen a new group of establishmentarians jump on to the offensive against anti-decentralization, de-control, pro-freedom cryptocurrencies - urging bans, crackdowns, fatwas, taxation, creating their own cryptocurrencies, demanding citizens sell, and outright confiscation (this group includes governments world wide and their mainstream media mouthpieces)...

India

India"s finance minister, Arun Jaitley, has clarified that the government does not recognize bitcoin as legal tender. According to the Economic Times, when asked about the government"s plans to regulate the cryptocurrency, Jaitley told reporters, "recommendations are being worked at." He continued:

"The government"s position is clear, we don"t recognize this as legal currency as of now."

 

Concerned over bitcoin"s anonymity and its potential illicit uses, justices issued a notice to the central bank and other agencies asking them to answer a petition on the matter, reports indicated.

Turkey

Turkey has claimed Bitcoin is in fact “not compatible” with Islam due to its government being unable to control it.

In a statement from a meeting of the state Directorate of Religious Affairs (Diyanet), lawmakers said that Bitcoin’s “speculative” nature meant that buying and selling it was inappropriate for Muslims.

“Buying and selling virtual currencies is not compatible with religion at this time because of the fact that their valuation is open to speculation. They can be easily used in illegal activities like money laundering, and they are not under the state’s audit and surveillance,” Euronewstranslates the statement republished by local news outlet Enson Haber.

Diyanet added that the same principles of “unsuitability” in particular applied to Ethereum.

South Korea

Kim Dong-yeon, South Korea’s deputy prime minister and the minister of strategy and finance, revealed earlier this week that the government is investigating various methods to better regulate the local Bitcoin market and tax Bitcoin users accordingly.

While the South Korean government and its local financial authorities are actively discussing the possibility of enforcing a policy on Bitcoin taxation, at a press conference, Deputy Prime Minister Kim stated that the government does not intend to include any Bitcoin taxation policy in 2018’s amendment of the tax law.

Holland

A Dutch news paper urges its citizens to sell their bitcoins patriotically because cryptocurrencies can undermine government and destabilize the economy.

A bitcoin world can destabilize the real economy, a euro is also solidified trust.

First, the bitcoin undermines the government because a lot of transactions are about money laundering and tax avoidance. Another problem is that the profits of new bitcoins that come with it do not benefit the government (as with normal money creation), but are absorbed in heavily environmentally harmful computer power.

Central banks also have less influence on keeping the economy stable. In times of crisis, central banks can, through their influence on ordinary banks, ease credit conditions and encourage people to consume. The bank has no control over the bitcoin economy and an economic crisis can become deeper.

The investor has air in his hands when the bitcoin crashes, but also when the company turns out to produce baked air.

France

Putting money in an empty type of asset is “very, very worrying,” Robert Ophele, chairman of France’s market regulator. Bitcoin has no link to the real economy, Ophele says in a panel discussion at the Paris Europlace Financial Forum, warning that cryptocurrencies are a way to commit cybercrimes, allowing access to illicit goods and services.

If bitcoin was a currency, "it would be a bad one," Ophel exclaimed, as it poses major challenge for central banks and regulators.

UK

The Telegraph reported just around the time of the big drop, UK "ministers are launching a crackdown on the virtual currency Bitcoin amid growing concern it is being used to launder money and dodge tax."

Taking a page out of the Chinese playbook, the UK Treasury has announced plans to regulate the Bitcoin that will force traders in so-called crypto-currencies to disclose their identities and report suspicious activity. 

According to the Telegraph, while "until now, anybody buying and selling Bitcoins and other  digital currencies have been able to do so anonymously, making it attractive to criminals and tax avoiders. But the Treasury has now said it intends to begin regulating the virtual currency, which has a total value of £145 billion, to bring it in line with rules on anti-money laundering and counter-terrorism financial legislation."

 

 

John Mann, a member of the Treasury select committee, said he expected to hold an inquiry into the need for better regulation of Bitcoin and other alternative currencies in the new year.

 

He said: "These new forms of exchange are expanding rapidly and we"ve got to make sure we don"t get left behind - that"s particularly important in terms of money-laundering, terrorism or pure theft.

 

"I"m not convinced that the regulatory authorities are keeping up to speed. I would be surprised if the committee doesn"t have an inquiry next year. "It would be timely to have a proper look at what this means. It may be that we want speed up our use of these kinds of thing in this country, but that makes it all the more important that we don"t have a regulatory lag."

The proposed changes come amid increasing fears that Bitcoin is being used by gangs to launder the proceeds of crime while also attracting currency speculators - with the value of the coin soaring in the past 12 months.

In other words, the same reason why the IRS is cracking down on Coinbase clients in the US is also why UK and European regulators are joining China in cracking down on capital flight.

United States

The US Senate Judiciary Committee is currently tackling bill S.1241 that aims to criminalize the intentional concealment of ownership or control of a financial account. The bill also would amend the definition of ‘financial account’ and ‘financial institution’ to include digital currencies and digital exchanges, respectively. According to ranking committee member Senator Dianne Feinstein, the proposed bill is needed to modernize existing AML laws.

The bill would amend the definition of ‘financial institution,’ in Section 53412(a) of title 31, United States Code, to include:

“An issuer, redeemer, or cashier of prepaid access devices, digital currency, or any digital exchanger or tumbler of digital currency.”

If passed, the bill would likely have far-reaching effects for users of digital currencies both in the US and abroad.

Earlier reports also indicate that the White House is actively monitoring cryptocurrencies which could only mean more attempts to regulate the world’s first successful decentralized monetary system. With the growing involvement of Wall Street and the ever escalating media attention, it is not surprising that governments are stepping up their attempts to regulate digital currency.

image courtesy of CoinTelegraph

But as usual, any regulation-related-headline that the machines instantly sell, is bid back up, since it seems the algorithms have not figured out that there is no real way to "stop" Bitcoin... which is exactly why the world"s elite are so desparate.

Several industry commentators have issued their opinions on the various proposed laws. Tone Vays claimed that he expects a confrontation between the Bitcoin team, including the holders and users, and the US government.

“It’s bad... I think it’s gonna end in a very confrontational way between Bitcoin - even Bitcoin holders and users - and the US Government.”

Who Knew? German Central Bank Has Been Selling Gold For More Than A Decade

Authored by Louis Cammarosano via Smaulgld.com,

Deutsche Bundesbank gold reserves shrink 45 tons over the past ten years.

• German Central Bank holdings fall From 3,420.6 tons at the end of Q2 2007 to 3375.6 tons, a drop of 1,446,783 ounces.


• German gold reserves have decreased 1.3% over ten years.

Bring the Gold Home & Sell Some

Deutsche Bundesbank, the central bank of Germany, has gained a high profile for its insistence on repatriating a good portion of its gold from vaults at the New York Fed, the Bank of England of London and the Bank of France in Paris. We have been covering the German gold repatriation story since they made their request in 2013 here, here, here and here.

The German repatriation requests aimed to rebalance the Deutsche Bundesbank’s gold holdings from nearly 70% held abroad to 50% held within Germany’s borders. The German Central Bank announced earlier this year that it has nearly completed its plan to repatriate its gold.

Jens Weidman, President of the Deutsche Bundesbank once famously said:

“Indeed, the fact that central banks can create money out of thin air, so to speak, is something that many observers are likely to find surprising and strange, perhaps mystical and dreamlike, too – or even nightmarish.”

In this video from the Deutsche Bundesbank, German nationals, Deutsche Bundesbank representatives and Herr Weidman explain the importance of gold to Germany.

Given the Deutsche Bundesbank’s statements and the accelerated German gold repatriation schedule, we are surprised to see that the Deutsche Bundesbank has been a steady seller of its gold over the past ten years.

German Gold Reserves 2007 – 2017

The Duetsche Bundesbank gold reserves fell 45 tons from June 30 2007 to May 31, 2017.

The Central Bank of Germany holds the second largest gold reserves of any central bank.

Currently, with the People’s Bank of China halting its gold purchases since October 2016, only the Central Banks of Russia, Kazakhstan and recently Turkey are steady buyers of gold.

Hedge Fund CIO Amazed At The Absurdity Of It All

The latest weekly recap from One River Asset Management CIO Eric Peters tries to bring some sense to an increasingly absurd global economic, social and political situation, and fails, finding that the "more than absured is no longer absurd."

From Eric Peters" Weekly Notes

“More than absurd!” cried Jens Weidmann, outraged by Pete Navarro. Trump’s trade advisor had deliberately talked-down the dollar to boost US exports by accusing Germany of deliberately weakening the euro to boost European exports.

The argument is quite obviously absurd, because everyone’s trying to engineer a weaker currency. But according to Jens, it’s so absurd as to be more than absurd. Like lifting yourself into the air by grabbing your ass with both hands.

Germany’s current account surplus is over 8% of GDP, 2016 factory orders soared 8.1%. Absurd!

Greek unemployment hit 23%; the IMF forecasts 275% Debt/GDP by 2060. Absurd!

Germany is suffocating Europe. “Absurd!” cry German policy-makers, in more than absurd self-defense, as the Bundesbank repatriated 111 tons of physical gold from the NY Federal Reserve in 2016, and 105 tons from the Bank of France - they’re nearly complete.

“Frexit is a choice of impoverishment that threatens French jobs and savings,” warned the ECB’s Coeure. But if they don’t vote Le Pen, they’ll vote for impoverishment Hamon-style, with his 35 hours of pay for 32-hour work weeks. Or they’ll vote Fillon, with his E830k of government-financed pay for no work at all (you just need to be his wife). Or they’ll vote Macron, who sounds absurdly sensible in a frightened world screaming out for something else, without knowing quite what it is, but willing to take a risk.

“Our leaders chose globalization, which they wanted to be a happy thing. It turned out to be a horrible thing,” Le Pen screeched, to a crowd in Lyon. “It sets the conditions for another form of globalization: Islamist fundamentalism.” An imminent ISIS Paris-bombing was thwarted, the French/German 10yr bond spread widened to 72bps.

“The people are waking - the tide of history has turned,” thundered Marine. As the more than absurd is no longer absurd.

And here is a bonus anecdote from Peters:

 “The UK, US and Italy have rejected the established orthodoxy of the post-1979 period,” said the CIO, in one of those English accents that make American’s feel stupid. “Prior to 1979 it was accepted that the overriding aim of economic policy should be the pursuit of full employment.” Post-1979 the only object of government policy has been the pursuit of a declining inflation rate.

“The former (full employment) bias succeeded so well it dissolved into high inflation and declining real wages. The latter (low inflation) bias succeeded so well it dissolved into deflation and zero net capital investment.”

On the one hand, it’s not clear what capitalism is without a return on capital (1979) and on the other, it’s unclear what capitalism is without capital investment (2016). “The post-Thatcher orthodoxy was designed to reduce inflation. What was not realized (except by the honest few) was that a war on inflation implied a war on developed-economy wages, and that this implied a shift in the distribution of output away from labor toward capital. Even less realized was that by stifling wage growth and reducing wage income as a share of the economy, one would stifle the economy overall.

“Voters rejected the former dispensation with the election of Thatcher and Reagan. Now they have rejected the latter.” Japan went further than any nation in the pursuit of low inflation, driving down real hourly wages for twenty years. An achievement without parallel. “The motor behind the economic outcome to which the electorate appears to object is the obsession with low inflation. In turn this is supported by an obsession with monetary policy and an anathematization of fiscal policy.” Trump says these must change.

“Whether he means it or whether he can change it is open to question. But if he does, a new world awaits as post 1979 orthodoxy is ditched.”

A new world, in which even the Fed"s second in command admits they have no idea what is about to happen next.