Cryptocurrency enthusiasts are generally against people and institutions like Donald Trump and his administration. They do not care for the onerous regulation that will come once they have been befriended by the likes of this government. So, when Mr Trump tweeted that he doesn’t care for Bitcoin, the cryptocurrency world jumped for joy. While Mr Trump likely believed that he would scare the community into running for the hills, he had the exact opposite effect. The big wigs of the crypto world were dancing in the streets as he effectively legitimised Bitcoin and made it a 2020 campaign issue.
After all, it is a bit rich to state that Bitcoin can be used by fraudsters and is not properly regulated when this rings true for traditional fiat currencies. Fraud on Wall Street? Fraud at big banks? Currency manipulation for central banks disguised as quantitative easing? I rest my case. The US dollar is under pressure and the writing is on the wall for what we might term ‘cash’.
President Trump is all about one thing: control. Control for the US and this current administration means they have power in the US dollar to get what they want across the globe. Anything that threatens that is fair game. Mr Trump cannot control the Federal Reserve. He has been angling for rate cuts far sooner than the current chairman – Jerome Powell – has been willing to give. Yes, the Fed has a track record for being a little slow on these things and the president may have a point. Nevertheless, its independence is what gives the US some comfort in the Fed. Hence Trump’s frustration as he tries to bully it from the sidelines.
Same goes for American foreign policy in relation to, for example, Iran. The new crop of economic sanctions designed to be surgical in respect of Iran’s leaders are reliant on the strength of the US dollar. After all, the pre-eminence of the dollar is not just great for American growth, but is a vital and indispensable foreign policy tool used to leverage and control American interests. Anything that negates, deteriorates or interferes with this control will not make Mr Trump a happy fella. And this is why he has taken to Twitter to tell us all that Bitcoin is bad.
It is this “badass” usage case that keeps many White House policy makers up at night. As Bitcoin is not owned by any central bank – yet – it is very difficult to legislate on it or against it. Imagine a scenario where Russia buys up massive amounts of Bitcoin. China and Iran do the same, pushing up the price and giving the digital currency even more gravitas as a storer of value. How, then, does the US use its economic power via the dollar to put pressure on these countries? It cannot. In essence, they could move away from the combination of the dollar to a new global currency – controlled by them. A scary scenario, but nevertheless plausible. I do hope Mr Putin reads this column…
A little disruption is good for those in power. It keeps them honest as they have to adapt and change. Bitcoin is obviously having some effect at the White House. It feels that now may be the time for less of a stand-off and more understanding of how Bitcoin can exist with the dollar. Many a president may have sat down to negotiate a win-win. I fear Mr Trump may ramrod Bitcoin even deeper under ground.
- Jim Duffy MBE, Create Special.