Kudlow: Radical progressives will try to regulate digital currencies

Kudlow: Radical progressives will try to regulate digital currencies

Larry Kudlow (FOX Business)

Tonight we need to talk about cryptocurrencies, sometimes referred to as digital currencies or even alt currencies.

These currencies are traded outside the banking system. They are developing their own digital ecosystem and yes, their prices can fluctuate a bit.

Of course, we saw this recently. Digital currency exchange company Coinbase is down 72% from just a year ago. Bitcoin, the most traded sub-currency, fell 37%. Another widely held Ethereum; fell 44%.

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Descriptive bitcoin tokens at a Bitcoin Exchange office in Tel Aviv, Israel on Wednesday, February 2, 2022. (Photographer: Kobi Wolf/Bloomberg via Getty Images/Getty Images)

According to a Pew Foundation survey, 16% of Americans own cryptocurrencies – a significant increase from the 1% who owned cryptocurrencies in 2015.

There are 90 million people on the Coinbase exchange, according to its documents. Overall, there was $2.9 trillion worth of digital currencies in market circulation by November. In November 2020, there was only $500 billion in circulation. So, you can see this big quantum leap. One way or another, one way or another, I think digital currencies are here to stay.

First of all, I can say that the topic of digital currencies is an internet issue. Internet based. Internet oriented. It is traded online and, at least at the moment, is not governed by the Federal Reserve, the Treasury, or other government regulators of the market, and that was always the spirit of the business when it started years ago. Think of Bitcoin as having a libertarian spirit.

We talked and thought about digital assets during the Trump administration. A big debate was whether Bitcoin, for example, is a currency in the classical sense of providing efficient transactions. Is it a commodity or just a simple investment?

Currencies and commodities and investment labels may be important for regulatory purposes, but none of these issues have yet been decided.

Institutionally, Federal Reserve and Treasury staff have always disliked digital money because they can’t control it, and these people like to control it, which is probably one of the biggest issues for our entire economy, alternative currencies aside.

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Investors are very upset now because they have lost a lot of money in recent weeks and I understand that and I feel their pain, but many risky assets have lost a lot of money in recent weeks.

NASDAQ is 27% off to date. Consumer discretionary stocks tumbled 29%. Telecom fell 27%, Information Technology 25%. Want more?

Well, the semiconductor index is down 28%. S&P Homebuilders fell 24%. S&P Retail fell 29%. JPMorgan Chase fell 25%. Citigroup fell 23%. Goldman and Bank of America fell 22%.

So it’s been a tough year, whatever you have, whatever you have, as inflation soars and market interest rates soar, and the Federal Reserve swears every day on their bibles to draw liquidity from the bloated economy. bonds, stocks, leveraged loans, junk bonds, Bitcoin. Really aside from energy, investing hasn’t been all that fun this year.

Therefore, the digital currency world has been hit harder than any other asset class. But you know, as Jimmy Carter once said in his prime, some things in life just aren’t fair. Investors should keep their eyes wide open when investing.

I hate to see someone lose money but that’s what happens in a free market capitalist system. I’m surprised Joe Biden didn’t upload his crisis of high inflation and collapsing survey numbers to Bitcoin. It’s the only thing she’s taken off the laundry list.

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A view of Bitcoin’s physical coins, Yichang, Hubei Province, China, 4 December 2021. (Future Publishing with Liu Junfeng / Costfoto / Getty Images / Getty Images)

I bet the radical progressives under his leadership will oppose digital currencies and try to control and regulate them to the death, just as these progressive central planners and big government socialists want to regulate and control everything else in the economy. . This is my premonition.

Finally, although they are already covered by the SEC, I think there will be some movement for more transparency in the digital currency world, especially for listed companies. Investors will want to learn more about the reserves and capitalization behind these companies and will seek some standardization in their accounting and reporting.

Now this can be done voluntarily by the people in the digital currency themselves – there is an interesting thought. Note that in our banking system, the FDIC provides $250,000 to guarantee deposits and the SIPC guarantees $500,000. I doubt that digital currencies or exchanges will get anything like this protection in the foreseeable future, and frankly it suits me very well.

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The last thought that’s interesting to me is, you know, gee buzz, you know, dollars. If there really was a King Dollar, if it was backed by a truly reliable standard of value, if we really knew that our Federal Reserve was keen to defend the value and purchasing power of our dollars, if we had truly embraced the King Dollar – then this alt-currency movement might not have grown so fast.

On the other hand, inflation would not be this high and the risk of the economy sinking would not be that high. I’m just saying.

So folks, live a little. Take a few risks in life. Digital currencies could be one of them.

This article is adapted from Larry Kudlow’s opening review of “Kudlow” magazine, dated May 13, 2022.

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