Government Control of Cryptocurrency Essay Example

My partner and I stand firmly and believe strongly that Increased U.S. federal regulation of cryptocurrency transactions and/or assets will produce more benefits than harms. Our framework for this case is dependent on the fact that there are more major benefits than harms. 

There are many major benefits of government control of cryptocurrency. Starting off, cryptocurrency is unpredictable and risky to use. According to Andrew Kessler of the October 25th Wall Street Journal, “Crypto had a big October, with bitcoin rising from almost $44,000 to a $66,000 peak in anticipation of the ProShares Bitcoin Strategy ETF, which actually doesn’t buy bitcoin, it buys bitcoin futures. Meanwhile, the stablecoin issuer Tether Ltd. paid a $41 million penalty after the Commodity Futures Trading Commission found the company had falsely claimed it had adequate dollars in reserve to back its token... Tether released vague pie charts of its $42 billion in “reserves” in May. Only 5% was in cash and around half of the backing of Tether was unnamed commercial paper. Is it a triple A rated paper from JPMorgan Chase or an IOU backed by Dogecoin? They don’t say.” Kessler states: “The attorney general’s office did release details of a fascinating cat-and-mouse game in its settlement agreement after stating that “Bitfinex and Tether deceived clients and market by overstating reserves….Tether was claiming money on another company’s balance sheet as its own reserves.” “Recently, the Biden administration announced it is considering regulating stablecoin issuers as banks. Mandating transparency for crypto would go a long way…. In June the stablecoin IRON, supposedly “soft pegged” to the dollar, dropped from $1 to under 70 cents after TITAN, its collateral token, fell from about $64 to nearly zero in a few hours of frenzied selling that caused $2 billion in losses…. are stablecoins being issued willy-nilly and increasing volatility in bitcoin and other cryptos? How much leverage is there in the crypto world? Bahamas-based crypto exchange FTX allowed 100 times leverage for margin trading, though in July the company trimmed it to a still insane 20 times. According to Bloomberg, part of Tether reserves include a $1 billion loan to Celsius, a crypto-lending startup. If cryptocurrencies are to become the backbone of a modern financial system, let’s open them up to scrutiny,” Kessler added. Adding on, to focus on one of the major cryptocurrencies bitcoin. Bitcoin’s value rates have been fluctuating. In just one day of March 2021, the rate dropped from 30% to 12%. Which cut the value more than halfway. With government control we would be able to have a more stable way and not have to worry about losing more than half of our invested money. It is in flux due to the spread of news around the world. To put that more in depth; Tesla announced that they do not want to take cryptocurrency as a form of payment. This spooked investors into dropping off their bitcoins. Currently, Bitcoin has many people such as Elon Musk who run the cryptocurrency world and can make the whole market crash.

Our second point is in correlation with our first as many cryptocurrencies are frauds. Many cryptocurrency tokens are scams. Cryptocurrencies are generally only accessed via the internet. There is no physical money nor payment. You exchange them online using your electronic device rather than an intermediary like a bank for example. Cryptocurrencies are constantly being created. Similar in the way that dollars do not have any real value other than the value we perceive it with, cryptocurrency is not backed by the government. This means your money is not secure. If the cryptocurrency you were using happened to get hacked, the government does not have a responsibility to help you out. Government regulation would help to keep your money. Not only could it get hacked while storing your money but the process of paying with cryptocurrency is also not legally protected. For instance, when you pay via credit or debit card, the transaction is safe and secured. If there is a disputed purchase, cryptocurrencies generally cannot help out. Cryptocurrencies are a risk and cannot be depended on to be reliable.

Referring to cryptocurrency markets, Securities and Exchange Commissioner Gary Gensler, observed in September, “…I think it’s more like the Wild West.” He has described cryptocurrency investments as “rife with fraud, scams, and abuse.” This was quoted from the New Yorker.

Adding on they said, “The lack of regulations over this burgeoning area has created an opening for widespread fraud; in May the Federal Trade Commission reported that consumers lost more than eighty million dollars on cryptocurrency-investment scams between October 2020, and March 2021, more than ten times the amount lost during the same period in the prior year….The stakes are also high for the crypto industry: until it becomes a part of the regulated economy, it will be associated with a notion of criminality.” 

Lastly, cryptocurrency mining harms the environment and contributes to the silicon chip shortage. Bitcoin and other cryptocurrencies are said to be the least efficient currency systems created and the government needs to intervene before we ruin our environment even more. The more a bitcoin is worth, the more hurt it does to our environment. We need the government to intervene now and prevent any more major harm. 

Many of the most lucrative cryptocurrencies, including bitcoin, use an energy-intensive process called proof of work to validate transactions. That requires significant computing power, which requires lots of electricity.”

“If you are mining crypto, you care about the cost of electricity and you don’t have the luxury to care about the climate so much,” said Alex de Vries, an economist who created the Bitcoin Energy Consumption Index. “If you put green energy into bitcoin miners you need to up your fossil-fuel imports,” Mr. de Vries said. “You’re just displacing the problem.”

Judge, if you affirm with us. You chose to keep our environment clean and ensure that everyone gets to keep their hard-earned money.