Despite the increasingly mainstream appeal of cryptocurrencies, a growing number of bigwigs in the the politicians establishment worry that its primary use stems from criminals and terrorists.
Some, like former State Secretary Hillary Clinton have even warned that crypto could even destabilize countries and currencies. She has said bitcoin could endanger the dollar’s status as the global reserve currency.
And she’s not the only politician leery of cryptos. Even former President Donald Trump has been critical of bitcoin. In June, Trump said he considers crypto a “scam.” Meanwhile, Senator Elizabeth Warren is dreaming up new ways to tax cryptos.
Still, others are most concerned that crypto could endanger U.S. interests, both at home and abroad. An attack on the Colonial Pipeline this past year seemed to confirm that view. Hackers behind the attack asked for millions in crypto…(the good news is, the FBI tracked the bitcoin and got the company’s money back.)
Yet, there is proof that some foreign actors have utilized bitcoin in an attempt to undermine U.S. influence. With that in mind, are Bitcoin, and cryptocurrencies in general, a threat to the dollar? Are they a threat to to U.S. interests abroad?
Bitcoin And Democracy
To understand whether cryptos are truly a threat, it’s worth understanding how non-democratic regimes feel about it.
As it turns out, authoritarian regimes really hate cryptos.
So far, a dozen countries have restricted the use of or outright banned cryptos. These include giants like China and small countries like Nepal.
And, the countries that placed harsh restrictions on crypto don’t exactly get high marks for freedom. In fact, those that have outright banned crypto are mostly authoritarian countries – like China, Ecuador and Bangladesh.
Meanwhile, Iran and North Korea, are not so “friendly” to cryptos either. While they may like the technology for how it can help the government to evade sanctions, they restrict the use of cryptos among the people at home.
On the other hand, countries that are relatively free don’t have nearly as harsh a stance towards crypto.
Perhaps the reason that authoritarians hate crypto is that it takes control away from them. Crypto is an existential threat to all of a highly controlling regime.
Crypto supporters hope that blockchain technology will one day undermine oppressive regimes. That seems to be happening, partly, in Venezuela, where decades of socialist policies are destroying the economy. Now, Venezuelans are using cryptos to beat hyperinflation and protect their wealth from the government.
Recent events gave an even more direct confirmation of that dream. Myanmar’s resistance group adopted a crypto token as its official currency.
Myanmar’s Crypto Resistance
Ethnic conflict and authoritarian rule plague this South-East Asian country. Now, a rebel group headed by supporters of Aung San Suu Kyi wants to restore democracy.
They have support from some local militias that resist the military junta…and, they accept Tether, a crypto token.
This resistance group, the National Unity Government, made its decision to accept crypto in defiance of the junta. Last May, Myanmar’s Central Bank banned all digital currencies. It also threatened offenders with high fines and jail time.
Crypto’s use by resistance groups is not surprising. The blockchain tech itself comes with decentralization built-in.
Transactions happen by themselves on the blockchain – which means no central authority needs to validate them. That means that it’s also much harder for states to intervene in that network. (Story continues below.)
Stablecoins, Tether And USD
The use of Tether is particularly interesting. Tether is viewed as a “stablecoin” – which means that it does not fluctuate wildly like other cryptos.
Rather, Tether is backed by U.S. dollars. The company behind it keeps a peg of one Tether to one USD.
Stablecoins like Tether allow users to keep their dollars in digital form. They allow crypto traders to lock their profits in, without having to move their assets into traditional banks.
They are also invaluable for people in economically unstable countries. That includes countries like Turkey, which is currently experiencing hyperinflation.
USD stablecoins allow everyone to hold the dollar, which is still one of the most stable currencies in the world. It’s no wonder that crypto adoption recently surged in Turkey.
Tether, and other USD stablecoins, show that crypto does not have to threaten the dollar. In fact, by allowing more people to hold the dollar, the tech could actually boost its status.
All that shows that the mainstream view on crypto is far from the whole story. Rather than blaming crypto, critics should question the Fed as the greatest threat to the dollar.