Action 58 Let’s talk about Crypto

Mar 5

Disclaimer: This action item was sent to us to post, but some parts are subject to debate. There have been some crypto Ponzi schemes that were investigated and prosecuted, but they are not all Ponzi schemes, While some individual projects (like BitConnect or OneCoin) were outright scams, Bitcoin, Ethereum, and many others are open, decentralized technologies with real-world applications, growing adoption, and use cases beyond speculation.

A Ponzi scheme requires returns to older investors funded only by new investors—with no underlying asset or value. That’s not how most legitimate cryptocurrencies operate.

"If you are in the game, you can sell your file to someone stupider or more greedy than you” -

There are quite a few US financial firms that invest in or offer Bitcoin exposure - BlackRock and Fidelity are among them. There are actually sensible reasons for exploring it as an investment.

So, what should we actually be asking? Assuming digital currencies are here to stay:

How do we want digital currencies to be regulated?
What protections do consumers need?
Should the US explore a digital dollar?
How can we distinguish between innovation and exploitation?

These are important conversations to have, but we need to base them on fact, and not fear. ~ Deer Isle Stonington Democratic Committee

Background: They’re laughing all the way to the bank. And they’re laughing at you – and me. Why? Because we are about to allow (some of) the federal taxes we pay to be “invested” in a “strategic cryptocurrency reserve”, instead of US Treasury dollar-denominated reserves (1).

Crypto is a Ponzi scheme (2). Here’s how it works. You buy crypto currency with actual money. Your money goes into the pockets of the speculators who sold you the crypto currency (Dogecoins, $Trump coins, etc,). What you have bought with cash is an electronic file which exists only as a record of ownership on a computer somewhere (in an energy-consuming server farm (3). Guys like Trump, Musk and their techbro buddies are eager to exchange their personalized crypto currency for your actual money. If you are in the game, you can sell your file to someone stupider or more greedy than you. They in turn inflate the price and sell it to someone even stupider or greedier. Eventually the value crashes. The last to own the currency has lost his shirt while the speculators along the chain of custody have gotten rich.

How would a crypto reserve work? The same way, except you would have no say in it. The federal government would use your tax dollars, actual money out of your wallet, not to fund cancer research, education, disaster relief or many of the other things we want the federal government to do. Instead, the government would use your money to buy electronic files, such as “doge coins” from Musk, “trump coins” from Trump, and a variety of other cool-sounding electronic files owned by other speculators. These “coins” are then traded until other rubes decide not to buy them anymore. The market value drops to zero and the last to own have lost their investment. This means your tax dollars have ended up directly in the pockets of guys like Trump. Are you ok with that? Did your “conservative” neighbor vote for that?

Actions:

1.Don’t let the insane idea of a cryptocurrency reserve get “legs”. Read and forward Krugman and Reich and Legum (linked under Extra Credit #4, #5, #6). When you are in conversation with someone who pretends to understand and approve of a cryptocurrency reserve, ask them to explain it to you. Don’t be fooled by attempts to bamboozle or gaslight you with terms like “block chain”. Keep asking questions. Force them to define their terms. Take notes.

2. Call our congresspeople and ask them to introduce/cosponsor legislation preventing the establishment of a US “Strategic Cryptocurrency Reserve”, and outlawing the purchase of cryptocurrency by the federal government!

Contact: Senator Susan Collins: Email: www.collins.senate.gov/contact/email-senator-collins/form

Phone: (202) 224-2532 (DC office), (207) 945-0417 (Bangor office)

Senator Angus King: Email www.king.senate.gov/contact

Phone: (202) 224-5344 (DC office), (207) 945-8000 (Bangor office)

Representative Jared Golden:Email: golden.house.gov/contact

Phone: (202) 224-3121 (DC office), (207) 249-7400 (Bangor office)

Representative Chellie Pingree:Email: https://pingree.house.gov/contact/

Phone: (202) 225-6116 (DC office), (207) 774-5019 (Portland office)

Urgency: The outcry should be immediate and loud.

Extra Credit:

(1) https://en.wikipedia.org/wiki/Cryptocurrency

For a primer on how the federal reserve works, see: https://www.federalreserveeducation.org/about-the-fed/archive-structure-and-functions/