S.4760 creates a black market for cryptocurrency trade

Three weeks ago, S.4760 was introduced into the U.S. Senate.  The alleged intent of the bill is to amend the Commodity Exchange Act and give the Commodity Futures Trading Commission jurisdiction over the spot trading of digital commodities.  Under the bill, digital commodities would also include cryptocurrencies such as Bitcoin and Ethereum.

Why regulate the spot market for cryptocurrency, I don’t know.  One of government’s products is the issuance of tax notices.  Thus, government has an interest in encouraging as many taxable events as possible for revenue purposes.  Defining digital commodity trading platforms and granting the Commodity Futures Trading Commission oversight over the self-regulatory organizations to implement membership criteria for digital commodity trading entities is a part of government policy to ensure orderly markets.

Part of creating orderly markets is to simultaneously create black markets.  We should expect a number of entities to push the boundaries of libertarianism and operate outside US rules for trading cryptocurrency.  Although government wants its transactional economy to expand, it is just as interested in maintaining the market share of parties that contribute to the success of elected and appointed officials by passing favorable regulations that keep competitors for digital trading platform services out of certain markets.

Government also sees itself competing against digital asset traders.  Sherrod Brown and Maxine Waters won’t come out and say it, but the last thing they want is Ethereum wannabes creating their own blockchain platforms that run smart contracts and digital coin over them creating a competing networked state.  If a couple million American farmers, doctors, driverless truck and car companies can connect clusters of affluent consumers or communities and circumvent the payment system currently dominated by banks, the US dollar would see lowered demand on the domestic front.

If a growing number of US citizens stop using their own currency, what impact do you think that will have on global demand for the currency?  In addition, what would be the impact on lower- and middle-income American consumers?

Alton Drew

23 August 2022

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