ACCORDING TO LIZ - Like the Emperor’s New Clothes, once cryptocurrency caught on, even staid investors – or should we say gamblers – threw caution to the wind and hopped on board without even their golden parachute.
As did the financial establishment including mainstream companies such as Forbes, catering to their customers’ Midas-mad desires.
And the pressure on politicians to further legitimize this fantasy get-rich-quick scheme.
A year ago Gavin Newsom issued an executive order that sought to promote blockchain technology, spur innovation, and explore how the technology might be used in government.
And last September he vetoed AB 2269, a bill overwhelmingly passed by both the California Assembly and Senate which would have created licensing and oversight for the wild west of the state’s cryptocurrency industry, to track how other entities’ fiscal transactions are overseen by the state's Money Transmission Act.
Newsom claimed it would be "premature" to create a licensing regime without further research and waiting... and waiting... on federal legislation. After all, since when did California choose to follow Washington’s lead?
California lobbying disclosures show that companies including Paypal, Blockchain.com, Coinbase, and the Blockchain Advocacy Coalition spent more than $400,000 lobbying members of the California government and Newsom himself from April through August.
Last May, shortly following Newsom’s executive order, two cryptocurrencies, Terra and LUNA, crashed, and the crypto markets foundered.
One of the largest cryptocurrency exchanges, Celsius Network, indefinitely stopped all transfers and withdrawals in June due to "extreme market conditions" and within a month filed for Chapter 11 bankruptcy to cover at least $1.2 billion in losses. More than 48,000 Californians were impacted by their financial difficulties and $650 million of their assets have been frozen.
Crypto speculation has also been an underlying factor in recent bank collapses and shakiness on Wall Street.
Investopedia defines cryptocurrency as “a digital or virtual currency secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers. A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.”
So cryptocurrency quickly attracted money launderers and others operating on the fringes of legality who were looking to move drug and human trafficking profits into the mainstream economy without having to comply with banking regulations enacted to block ill-gotten gains and criminal enterprises.
Cryptocurrency also had a clear-cut appeal for libertarian-leaning gamblers, including many corporate honchos who want to keep their cake away from government regulation and taxes.
But what is its true value? No T-bills or gold support it. There are no factories or fertile fields to produce tangible assets in the future. Its blockchain lies on energy already spent, wasted on the creation of an intangible.
Together, the 34 large-scale Bitcoin mining sites in the United States generate 16.4 million tons of carbon dioxide emissions according to a recent New York Times article and waste enough energy to power three million American households.
An article in The Nation suggests that shutting them down would slash their carbon emissions, releasing power for constructive purposes while the country concentrates on transitioning to green energy production.
And if the United States had imposed carbon emission levies on energy production similar to those in Europe ten years ago, the extra expense might have stopped some cyber-currency ventures from the get-go and would have priced others out of the type of market that has driven the current excesses.
Not to mention generating billions for the U.S. Treasury.
Who actually uses Bitcoin? Venture capitalists and high-net worth financial gamblers as well as, unfortunately, pension plans and otherwise reputable investment vehicles. Also drug kingpins, the seedy underside of society, and the victims of get-rich-quick scams.
It’s an ego trip for the uber-wealthy to collect Bitcoin just to say that they can; to be one up on the super-rich parvenus next door.
And to spend them on mega-yachts, private jets, and all the other accoutrements the rest of us can’t even aspire to but have one thing in common – these have limited use and are but toys that contribute to the destruction of this world we live in. Another thing the self-entitled have in common is the desire and ability to buy our elected officials so that they can perpetuate the consequences of their greed on the rest of us.
Elected officials have a single primary responsibility – protect their constituents. Not their friends and not deep-pocket donors.
Pet rocks’ appeal was in the value people chose to assign them, a choice that could be reversed on a whim. And often was. At least the gullible rock-purchaser was left with a paperweight. Or something to throw at the yowling cat next door.
Cryptocurrency is far more dangerous than pet rocks – the caveman’s club has evolved into a nuclear weapon, And California needs a leader who can face this crisis, not one who can be bought and sold by lobbyists.
(Liz Amsden is a contributor to CityWatch and an activist from Northeast Los Angeles with opinions on much of what goes on in our lives. She has written extensively on the City's budget and services as well as her many other interests and passions. In her real life she works on budgets for film and television where fiction can rarely be as strange as the truth of living in today's world.)