President Donald Trump has weighed in on the cryptocurrency debate, saying in a series of tweets Friday that he’s not a fan of Bitcoin or blockchain-based digital money in general because it’s highly volatile and “based on thin air.”
“Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity,” Trump tweeted.
The President’s tweets on fly in the face of comments made just one day earlier by Federal Reserve Chair Jerome Powell, who acknowledged that while Bitcoin may be far from mass adoption it is “a speculative store of value, like gold.”
Powell’s remarks came during testimony to the Senate Banking Committee on Thursday about Facebook’s recently announced Libra cryptocurrency project.
Among several tweets, Trump took direct aim at Facebook, which after months of speculation unveiled plans to launch its own fiat-backed cryptocurrency and digital wallet where the currency can be stored.
The President’s comments could also spark debate among Democratic presidential candidates over the country’s regulatory approach toward cryptocurrencies and the underpinning technology – blockchain, an electronic distributed ledger.
Worldwide, blockchain-derived business value is forecast to grow from $9 billion this year to $50 billion in 2022, according to Gartner. The greatest growth between now and then is expected to take place in 2020, when Facebook plans to launch its Libra coin and Calibra digital wallet; that year alone will see a 128% annual increase in business value.
Trump tweeted Facebook Libra’s “virtual currency” will have little standing or dependability.
“If Facebook and other companies want to become a bank, they must seek a new Banking Charter and become subject to all Banking Regulations, just like other Banks, both National,” Trump wrote. Those comments came one day after he criticized both Facebook and Twitter for what he called bias against his supporters.
Like other cryptocurrencies backed by fiat currency, Facebook’s digital money would be purchased through a typical financial network and then stored in the Calibra digital wallet application for making purchases via ads on the social media platform. A user could also do the same thing through Facebook’s most popular communication platforms: WhatsApp and Messenger.
Facebook did not respond to questions by Computerworld about whether the president’s comments would affect its plans to issue a cryptocurrency.
Avivah Litan, a vice president of research at Gartner, said while it’s “very difficult” to analyze Trump’s intentions from his tweets, “it sounds to me like he is gearing up to clamp down on cryptocurrency adoption by Americans.
“It wouldn’t surprise me if Trump tries to ban ownership or use in the U.S., but there are still checks and balances in the U.S. governmental system and any ban would likely be challenged in court and/or by Congress,” Litan said.
Martha Bennett, a principal analyst at Forrester Research, said regulators and central bankers around the world are already concerned about Facebook’s plans and regulatory scrutiny – or outright government intervention – of cryptocurrency and token schemes.
“Given the large global user base of Facebook, it’s understandable that regulators everywhere insist that Libra will have to be compliant with existing regulations around Know Your Customer and AML [anti-money laundering],” Bennett said via email. “And that they also need more detail on the exact nature of Libra in order to ensure that there’s no systemic risk.”
For example, Bennett pointed to comments by Mark Carney, the governor of the Bank of England, who said last week that “it’s got to be rock solid right from the start. Or it’s not going to start.”
“Whether Libra is regulated as a bank or as a payment systems provider is a separate discussion – it all depends on the services it provides. Last, but by no means least, there’s no doubt an additional element in play given Facebook’s past behaviors around customer data,” Bennett said.
Alex Tapscott, the co-founder of the Blockchain Research Institute, a think tank whose members include CIBC, the Depository Trust and Clearance Corp. (DTCC), PNC Bank and tech firms such as IBM and Salesforce, believes Trump’s tweets could have a chilling effect on blockchain in general.
“I think the President is wrong to demonize the technology. Blockchain in my mind and in the minds of many experts is one of the greatest technology innovations in a generation,” Tapscott said. “We’ll see if his tweets leads to a substantive policy shift. Sometimes he’s just expressing his opinion.”
Facebook’s potential to onboard its 2.4 billion users to cryptocurrency use is the most consequential move for the industry to date, Tapscott said. He does not believe the Trump comments will increase scrutiny around Facebook’s crypto project, and argued that the social media giant had already put itself in a harsh spotlight with its past privacy problems.
If the President were to take a hostile regulatory approach toward cryptocurrencies, however, it could result in the U.S. ceding its current innovation leadership to other parts of world – most obviously China, a nation Trump has often made his political “punching bag,” Tapscott said.
“They are already rivaling us in terms of the internet. There are more internet users in China than the U.S. by factor of two or three. They’re way ahead of us in the mobile payments industry with Alipay and WeChat,” Tapscott said.
“China’s internet industry is already very sophisticated, but the country also has its own issues,” Tapscott continued. “China is not a free market. They’re free to regulate human behavior. I don’t think we want an authoritarian government leading the way on one of the most important industries of the future.
“We are at this important inflection point in terms of the future of cryptocurrency technology and the future of our economy,” Tapscott said, “and the U.S. runs a real risk if it turns its head away from this technology…, letting China lead the way.”
China and Russia have both clamped down on the use of Bitcoin, initial coin offerings (ICOs) and cryptocurrency mining, a method of using computer processing power to create new cryptocurrency via an algorithm. China, however, has also considered creating its own national digital currency based on blockchain.
Last year, Yao Qian, who heads up research in the field at the People’s Bank of China, said “there should be a single bank-issued digital currency (CBDC) incorporating elements of cryptocurrency.”
Jonathan Johnson, a board member of Overstock.com and president of its venture capital arm, Medici Ventures, said stablecoins like the one Facebook is launching actually lessen volatility and are easier for a novice to use comfortably. The IRS, Johnson predicted, will need to start treating cryptocurrencies like fiat currencies – not assets – “otherwise, it is too complicated from a tax perspective to use them.
More than five years ago, Overstock.com became the first major retailer to accept bitcoin as a form of payment for goods. Today, it accepts more than 40 versions of the digital currency for online purchases.
About the same time the online retailer was embracing bitcoin for payments, it put a venture capital stake in blockchain distributed ledger technology (DLT) through Medici Ventures, its Salt Lake City-based subsidiary. JP Morgan Chase has also launched its own fiat-backed cryptocurrency and blockchain is being piloted for use in a wide variety of markets, from healthcare and shipping to FinTech and real estate.
“This is an important technology and one that creates lots of economic value and lots of jobs, but it shouldn’t exist without thoughtful policy and regulation,” Tapscott said. “But what’s not productive is to write it off wholesale.”
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