Terence Zimwara
United States of America President is not one given to
diplomacy, Donald Trump speaks his mind and in many ways that endears him with
his supporters. Trashing Washington’s well established etiquette and its
venerable poise, this president has taken on powder keg topics or issues with
breathtaking unruliness. From the trade spat with China or a brawl with Iran to
lashing out at a special counsel investigation into 2016 US elections, Trump’s
showmanship looms large.
However, for those searching for clues of the exact
happenings inside the Trump White House, the twitter rants are a treasure trove.
Journalists now seem to prefer reporting on his twitter feeds to official
government announcements. Anything he says grabs headlines around the world.
So many crypto-currency enthusiasts and supporters could not
believe their luck when the man teared into Bitcoin and the upcoming Libra
recently. Trump attacked Bitcoin and claimed the US dollar was the strongest
currency before suggesting (or threatening) that Facebook had to establish its
own banking charter if it wanted to launch Libra.
As usual, those looking for clues from the twitter rants found
this to be quite bemusing but interesting nonetheless. For crypto-currency discourse
had until now remained limited to a motley of crypto supporting websites, some
tech magazines and on rare occasions, the mainstream media. The bigger media
may have been avoiding this subject, possibly out of ignorance or perhaps due to
sinister motives. Whichever the case, the effect has been clear and consistent,
it suffocated this debate.
So when an unhinged Trump tears into crypto-currency there
has to be something much bigger about the topic than the attention it had been
getting. Interestingly, the US Treasury Secretary Steve Mnuchin addressed the
same issue but was more measured as did Jerome Powell, the chairman of the US
Federal Reserve. The two men may have been trying to walk back some of the
president’s unrestrained comments earlier.
Nevertheless, it is Trump’s utterances that matter because
they are not laced with the usual diplomatic niceties, when he sees a threat he
makes sure everyone knows about it.
So what is the threat here anyway? Apparently the US
government establishment believes a crypto-currency like Libra stands a good
chance of succeeding and thus possibly ending the US dollar’s global dominance.
That is the first clue to be gleaned from Trump’s twitter rants; it is primarily
about the impeding loss of power and not the usual money laundering or
terrorism funding talk that officials have tried to use to sanitize their alarm.
Bitcoin and Libra are real threats to Washington’s foreign
policy and its sanctioning toolbox, the Office of Foreign Asset Control (OFAC).
It seems a widely adopted crypto-currency as Libra is promising to be, can
potentially nullify the effectiveness of the financial sanctions policy.
Facebook and its Libra partners may have taken the unusual step (in the crypto
world) of engaging or of trying to submit to authorities first before launching
but that is being rebuffed because the issue has more to do with threats to America’s
global dominance by crypto-currencies. KYC or AML concerns are just smoking
guns!
The second clue comes from the stance taken by congress, a
body often at odds with Trump, but seemingly happy to back him on this one. Such
unity should be enough to raise stink to any neutral observer. When a
polarizing president’s utterances are in sync or are supported by a usually
divided congress, it means the threat is real. In fact, a bi-partisan congress
has even gone a step further by asking Facebook to halt its march towards Libra
launch because lawmakers want to time to study or to have their concerns
addressed first. Of course Facebook may not be in a position to adequately address
any such concerns. Simply put, congressional leaders do not want Libra to
compete with the US dollar period! No amount of glossing over will hide this
fact.
Facebook’s blockchain lead David Marcus tried to point out
that the US need not be left behind with this technology when appearing before
the Senate Banking Committee but lawmakers were unmoved. Their disdain of
Facebook and general fear of competition blinds them to a point that any
rationale argument in favour of privately issued currency is assailed.
While Facebook is hardly the right candidate to speak on
behalf of this industry, Marcus did manage to highlight one important fact, the
need to serve those without access to financial services. The world has 1.7
billion people who are unbanked and many more who under-banked and this is has
been the case pretty much for years.
Some lack a bank account not because there
are no financial institutions around them but because they do not trust them or
lack the necessary documents needed. A World Bank Global Financial Index survey
found that close to 20% of unbanked respondents said they do not trust
financial institutions as their reason for avoiding the banking system.
Banking fees as well as accessibility are some of the key
issues of concern to those without bank accounts and it these areas where
crypto-currencies hold an advantage over traditional banks. One only needs
internet access to be able to access or use crypto-currencies, which are also
better at making cross border payments or remittances.
These are real life use cases and trying to forestall a US
company from providing such services will only result in non-US companies or the
difficult to regulate cryptos like Bitcoin filling this void. Crypto-currencies
are inevitable, whether privately, anonymously or publicly issued, the world actually
needs them.
Governments need to come to terms with this reality sooner
rather than later and embrace this technology. Moreover, efforts should be
undertaken to see how these technologies can be integrated with the
conventional financial system.
Attempting to legislate against innovation— as the Capitol
Hill rumor mill seems to suggest—will be a signal to rivals that the United
States is relinquishing its position as the number one hub for innovators. In
any case, any such legislation will be akin to putting cart before the horse,
it goes against the conventional way of doing things. A new product or an
innovation must given a chance to grow and express itself before one passes
judgment. Legislation should only come when there is sufficient information and
knowledge about an innovation.
Indeed fear and cynicism might win votes and elections
sometimes but that should never be the case when it comes to lawmaking or
government policies, which often outlast elected governments. Instead, sobriety
must always take precedence.
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