Celebrates the encryption, but Trump’s strengthening may end badly

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The writer is a professor at the University of Cornell, an older colleague in Brookings, and author of “The Future of Money‘

Supporters of encrypted currency Celebrate Donald Trump’s presidential victory, and saw a good spirit. price BitcoinThe original and papyrus currency has increased since its re -election in November. During the Trump era, the encryption industry appears to be ready to get what you want-the legitimacy provided by government supervision and light touch regulation. It is a toxic mixture for both the financial system and investors.

The change in Trump’s views about encrypted currencies – from skeptics to the voice lawyer – does not hide the fact that nothing has changed in the basics of this asset category, including its lack of fundamental value. But the spirit of his administration lined up well with the liberal bitcoin aspects.

Shortly before the opening of this week, Trump and his wife Melania launched coins. It is striking to the government official, not to mention the leader of the free world, to create a purely speculative financial product that they can benefit from. Financial constipation has left some encryption investors to worry that Trump may undermine the acceptance of the prevailing cryptocurrencies by enhancing perceptions that they are all Fraud operations mainly.

Trump since then has corrected the ship somewhat. Release Executive order It supports the encryption industry and ordered the governmental system to establish an organizational framework to enhance its activities.

The new president wants America to become the planet’s encryption capital, and float a an offer To create an official backup of the American bitcoin. The creation of such a reserve would give bitcoin formal frustrating. But it does not make sense. Instead, this will bear the risks associated with bitcoin volatility. Even if it achieves paper profits, the sale of a large share will lead to a decrease in bitcoin, which reduces the value of the rest of the government’s property.

However, it is clear the way the wind blows. Watch the nominations of encryption fans Scott Pesin As Minister of the Treasury and Paul Atkins As Chairman of the Securities and Stock Exchange Committee. David SachsNow, Crypto Crypto Crypto will also be a strong defender of this industry.

The real believers in the decentralized financing based on Bolockchain technology in Bitcoin. The idea that the government should participate in the creation, publication and use of Bitcoin that contradict the same principles that were created according to it.

At least its digital portfolio becomes more obese, which may reduce the strike.

Financial organizers will undoubtedly reduce the restrictions imposed on the issuance, use and trading of encrypted currencies and coding financial products. Creators, promoters and exchanges will be able to encrypt more freely, while banks and investment managers will face less restrictions in dealing with assets. These changes will enhance the adoption of wide encryption by both retail investors and institutions.

The circular of encrypted encryption and the good position of the organizers will stimulate closer relationships between industry and traditional financial institutions such as commercial banks and investment management companies. These communications will display the traditional financial system of risk with an advantage.

Meanwhile, the organizational agencies and senior administration officials give legitimacy to the assets of encryption, despite their very speculative nature and the risk of exposing non -advanced retail investors to their fluctuations.

Investors must be free to invest as they like, regardless of how dangerous the assets category. But when an American president and senior officials speak positively about an industry, investors can fail their guard. History shows that such government reinforcement often ends badly, as retailers and taxpayers bear the financial burden.

The housing market in China bubbleWhich turns with painful consequences, provides interesting parallel.

For many years, the Chinese government relied on The property sector To lead its economy while promoting it as a means of families to build their own wealth. State -owned banks have provided loans to real estate and mortgages developers for families. Local governments that depend on them Land sales As a main source of revenue, he increased the mutation of property. Now that the real estate bubble exploded, the burden decreases significantly on low -income families that have closed a large share of their property savings or were collected together the payments that now hold the failed developers.

The Chinese housing boom was at least linked to the real physical assets. On the contrary, it has no internal value. Prices fluctuate leads to an unprecedented exchange and depend on its scarcity, a characteristic that can be said in which gold shares.

There is nothing wrong with digital gold or with investors who want to wrap the dice, unless the president and government officials are shouting.

Trump and his implicit government agreement for Bitcoin and other encrypted currencies means that the final losers – so when and when fixed organic pollutants – will be American taxpayers.