The Bitcoin rollercoaster, calculated to be around $107,000 today after their recent crash caused by the usual Israel-Iran scare tactics, has everyone talking. Exciting that @realDonaldTrump is talking up “massive” crypto investments! Crypto traders are nearly drooling at the possibility of a Fed rate cut. Before we all dive headfirst into this digital gold rush, let's pump the brakes and ask a crucial question: who really benefits from this potential Fed-fueled crypto boom?

Whose Freedom, Whose Needs?

Of course, the concept of decentralized finance, beyond the reach of a central government, is tempting. Financial freedom is a powerful rallying cry. Let’s face it, today’s crypto market resembles a libertarian paradise – not exactly the inclusive playing field. We’re discussing an asset whose value can turn on a dime due to geopolitical fearmongering or a Twitter storm started by a former reality show star. One might think that sounds like freedom, but it’s just a radical reinvention of casino capitalism, cloaked in Silicon Valley buzzwords.

The committee could also pivot dovishly from political pressure and changing views on inflation. This rule change has the potential to release a tidal wave of capital into the crypto market. Although a few will earn millions, where is the cash for all of society’s priorities that may be submerged in the deluge? Education, healthcare, infrastructure... Stable societies depend on these key building blocks. The siren song of easy wealth threatens to drown them out.

Crypto's Inequality Amplifier Effect

A Fed-induced crypto surge isn’t going to magically redistribute the wealth. More likely, it will exacerbate existing inequalities. In addition to advanced investment tools, the wealthy have all the right insider information. They are, after all, in the perfect position to take advantage of this speculative frenzy. Think about it: who's more likely to understand the nuances of DeFi or navigate the complexities of crypto wallets – a seasoned Wall Street investor or a working-class family struggling to make ends meet?

And where’s the guardrails against predatory flotch-floob schemes? A flood of amateur investors, attracted by the siren call of get-rich-quick schemes, is an open invitation to fraud and market manipulation. We must address the genuine threat that these new technologies will put vulnerable populations at risk, as represented by the charlatan capitalists lurking in the shadows. Remember the subprime mortgage crisis? We simply cannot — and must not — afford to make the same 20th century mistakes in the digital age.

Beyond Freedom, A Call for Regulation

The truth behind the narrative that crypto is freedom is more complex, and that simplicity is dangerous. On one hand, it holds incredible promise for innovation and disruptive technology. On the other hand, it poses significant threats to financial stability and our national security. Come to think of it, crypto’s anonymity has been a double-edged sword used by everyone from drug dealers to money launderers to terrorism funders. It can be used for tax evasion, undercutting governments’ capacity to finance public goods that are of perennial importance. In addition to being a terrible use of energy, bitcoin mining is described by defenders as an environmental savior. It uses tremendous amounts of energy and fuels climate change.

That means:

  • Stronger KYC/AML Regulations: To prevent money laundering and terrorist financing.
  • Consumer Protection Measures: To safeguard investors from scams and deceptive practices.
  • Environmental Standards: To mitigate the carbon footprint of crypto mining.

It’s time for the Fed to take into account the far-reaching societal impacts of its monetary policy actions. A reckless embrace of crypto would directly counter efforts to advance economic opportunity, environmental sustainability, and national security.

Geopolitics and Developing Nations: A Warning

Last week’s Bitcoin price drop exacerbated by the new Israel-Iran fronts presents a painful picture of what that especially discordant future could look like. As crypto emerges to become a more dominant asset class, developing nations may find themselves on the raw end of geopolitical instability. Now imagine a country whose entire economy depends on crypto. Now, picture that a faraway military conflict undermines the stability of that crypto, sending the entire nation of exiters into an economic crisis. The consequences could be catastrophic.

Moving the economy over to crypto would drive the concentration of economic power much farther. Those who hold the power over the technology and infrastructure will shape this new reality. This has the potential to deepen current power disparities and establish new kinds of digital colonialism.

Bitcoin's V-shaped recovery might look impressive, but it shouldn't blind us to the very real risks ahead. Related Take the plunge—let’s approach this crypto boom with skepticism as our baseline. Equally, we need to be laser-focused on the social value. Better to pursue true freedom than to accept fool’s gold.