IMF´s Christine Lagarde has issued a blog with the chilling title “Addressing the Dark Side of the Crypto world”. According to Lagarde, one of the major perils of Crypto-assets is that they are “potentially a major new vehicle for money laundering and the financing of terrorism.”
The key word here is “potentially”. The reality is very different. Crypto-assets do not even get close to being — even potentially — a major vehicle for money laundering. Indeed, according to a recent study of the Center on Sanctions and Illicit Finance, in the years 2013 to 2016 the “amount of observed Bitcoin laundering was small — less than one percent of all transactions entering conversion services”. Now let’s play big and not consider only conversion services but let’s assume that 1% of the entire Bitcoin market cap was actually laundered. Bitcoin´s historical market cap has been fluctuating and steadily climbing in the last 5 years. Make a very approximate calculation — take each year end market cap as reference — and the market cap in the last 5 years has averaged US$50billion per year, growing from US$9,2billion in 2013 to US$216 billion in 2017. The worldwide estimated amount of money laundered globally every year is 2% to 5% of the global GDP — therefore circa US$1,5 trillion to US$4 trillion are laundered every year. It is plainly clear that the circa 500million — 1% of 50billion average market cap in the last 5 years — of “Crypto-laundering” are a laughable amount compared to the global problem. It is like fighting global Climate Change by prohibiting farts. Even considering Bitcoin´s 2017 peak market cap of US$326 billion, if 3,26billion were laundered through Bitcoin, this would be merely the 0,081% of global money laundering, a “very, very, very tiny potential” problem to have the Head of the IMF so worried.
So why then Lagarde is busy wasting her precious time lying about trivial things such as Crypto-assets, instead of focusing on issues which constitute a “clear and present danger” to this collapsing monetary system?
Enter dissimulation/deceit. Sun Tzu quote, Part 7–15: “In war, practice dissimulation, and you will succeed”. That is exactly what regulators excel at doing. They claim there are big risks — which are in fact negligible as demonstrated above — to justify the right to intervene and regulate the sector to favour their cronies.
Now let’s dissect a bit more Lagarde´s statements and get a better reading in between the lines.
“Of course, money laundering and terrorist financing is only one dimension of the threat. Financial stability is another. The rapid growth…, and their ill-defined connections to the traditional financial world could easily create new vulnerabilities.”
So, after conceding that money laundering and terrorist financing are only one dimension of the threat — i.e. sorry we lied you about it but we needed to raise the attention — she finally mentions her real concern, the threat to financial stability. But if Deutsche Bank’s US$46 trillion derivatives off balance sheet are not a threat to the financial stability and no one at the IMF or any other regulatory body even thinks that this is worth investigating, certainly a mere US$354 billion global market cap of all crypto-currencies as of today March 14th, are not a threat to anyone.
So where is then the real threat to financial stability? What she really worries about is that the financial elites may lose their control over the monopoly of money creation, which is the most important pillar of this Fiat centred monetary system. Therefore, because the crypto world has “ill-defined connections to the traditional financial world”, i.e. it does not belong to and it is not controlled by the financial elites — which is per se a threat — it is necessary to bring it under the control of the financial sector. This is of course the opposite of what Satoshi — the creator of Bitcoin — dreamed of.
She continues, “But we recognize more needs to be done to get a handle on the emerging threat posed by crypto-assets and to secure a stable financial system”
As if the systemic irrelevant crypto-assets could pose a risk to an otherwise “very secure and stable” financial system. A quick remainder of the last 40 years of financial history is clearly needed. Millions of lives have been ruined and the savings of millions of families have been lost due to the failures of the current system and its main actors, which have generated the credit excesses and the bubbles which brought upon the 1982 Lat-Am crisis, the 80s US Savings and Loan crisis, the 1987 Stock Market crash, the 1989 Junk Bond crash, the 1994 Mexican-Tequila crisis, the 1997 Asian crisis, the 2000 Internet bubble and the 2007 sub-prime crisis. The system that the IMF regulates and supervises generates on average a crash every 5 years. And this is certainly not the fault of crypto-assets.
“We can fight fire with fire…” Finally Lagarde reveals her Orwellian dream where the financial elites can use the very same tools and innovations such as DLT´s, biometrics, AI and cryptography to control both the crypto-world and the society in general.
Lagarde herself seems to have changed her rhetoric from the speech at the Bank of England only 6 months ago, in which she said that “For now, virtual currencies such as Bitcoin pose little or no challenge to the existing order of fiat currencies and central banks”. Although she advised not to “dismiss lightly crypto currencies” because “they could give government-backed cash and monetary policy a “run for their money” in the future”.
We can only speculate what has happened in the meantime that made her so much more worried. Maybe it is the dollar continuous fall, or the recent stock market flash-crash, or the growing liquidity problems in the Eurodollar market, or the popping of the US treasuries bubble, or the banks´ pattern of liquidating gold reserves to raise liquidity or maybe Bitcoin´s meteoric market cap increase and the fear that it may subtract liquidity to this collapsing monetary system when a new crisis will strike. Who knows.
But more importantly what conclusions can we draw from Lagarde´s blog as well as from the most recent crescendo of hysteria, critics, alarming statements and plain lies of Central Bankers and regulators worldwide?
Special interest groups and lobbies are always hard at work to quash the attempts to disrupt the status quo. Indeed, because of their disruptive nature and the potential threat that crypto-currencies pose to the financial elites and the current monetary system, they will try to embrace and control what benefits and serves their interest and will try to suppress what threatens their interest. Satoshi´s vision may well remain utopia and Lagarde´s dystopian vision of the Blockchain and her Orwellian dream of societal control may well become reality. Time will tell.