Following article is an opinion.
How do you keep the masses from accessing any form of vehicle that could make them rich? Create rules that will by design preclude them from participating in any opportunities.
That is precisely why all the investment opportunities are reserved for the rich and the elite.
Accreditation of Investors is a fancy way of ‘filtering the masses out’. If consumer protection is actually what Government was after we would all be required to ‘prove our eligibility’’ to enter into a Casino.
Drama is for the masses; Laws are for the Rich few
There is a famous quote in my country: “Law is on the side of whoever can afford the best attorney”.
That is exactly the difference between those who got the ‘jail free card’ in spite of ruining millions of lives and those who went to jail for simply ‘chilling out and minding their own business’.
Why is the Goldman Sachs and Marijuana arrests important?
You may be wondering what Goldman Sachs and Marijuana arrests have to do with Facebook’s libra.
Both cases were settled with fines and zero arrests.
There lies the hint of what is about to unfold.
In our opinion, we will see a lot of drama. People from high ranks calling bitcoin a ‘national threat’ and calling Facebook for a congressional hearing is all part of that concerted stage act. A deliberate and methodical campaign to incite fear will be followed by introducing laws.
These laws will be complex and difficult to comply with.
Because the masses cannot afford good accountants or attorneys with proficiency, but Oligarchs like Facebook can.
“Quickest way to make money on Wall Street is to take the most sophisticated product and try to sell it to the least sophisticated client” – Greg Smith, Former Goldman Sachs VP.
Bear market took out the majority of crypto projects, complex regulations will take out the rest
There were a lot of scammers that plagued the crypto space during 2017 hype cycle. Most of these fraudsters are out of the market now. Bear market has cleansed the crypto space of these undeserving players.
There were some good concepts backed by well intentioned folks who wanted to change the world with blockchain, they too were the victims of the bear market. Those who are either working without salary or working out of their garages to bring their ideas to life will soon be greeted by complex regulations.
In our opinion, here is what is going to unfold in the next 1-3 years (basically, a realistic-pessimistic speculations):
Regulations will be cumbersome and it’s a blessing for companies like Facebook
As discussed above, the regulatory framework is likely going to be difficult to comply with. These complications will be introduced, through lobbyists, to curb the competition by creating administrative barriers (remember ‘Accredited Investor rules’). It is funny how the companies that were born in garages will conspire to prevent the future garage hits from entering the market. But that’s the way it is.
Most innovative and idealistic companies will be crushed under the weight of regulations
Companies with world changing ideas, enthusiastic dreamers and visionaries will be crushed by the retroactive compliance requirements. They will probably:
- Close their shops and dust themselves off
- Sell their concepts to big players
- Become employees of these big players
After that, the ideas created to change the world will ultimately be used to make more money for the rich few.
USD may be pegged against Libra and world currencies may trade USD via Libra
Federal Reserve has alluded to the possibility of issuing its own digital currency back in 2017. In a research paper by Federal Reserve Bank of Philadelphia titled “Should Central Banks Issue Digital Currency?”, researchers were positive toward having a Federal Reserve Digital Currency.
In the event of Federal Reserve issuing its own digital currency that is backed by USD then we foresee that Facebook’s Libra will be pegged to the USD. The countries where Libra will be made available will start trading value in USD (pegged to the Federal Reserve Digital Currency).
This move could completely obliterate the projects that are relying on facilitating payments over blockchain.
Governments have and will continue to facilitate business (and it’s good for BIG businesses)
Let’s say you piss off a mega employer and they leave your State or country, what happens?
You lose 100s or even thousands of jobs. Your constituents will be mad at you. Loss of revenue is not acceptable to governments and its citizens, irrespective of the compromises that it requires.
Have you seen the absurd things that cities tries to do to lure Amazon into their locality?
Same will be true for Facebook.
Governments will come to a compromise, slap few regulations in place so that business
goes on as usual.
China factor (we don’t want them to beat the US to the digital currency punch)
China announced that they are much closer to issuing their own National Digital Currency.
From most nations perspective, they would rather give too much power to Facebook than to lose the race of digital currency dominance to China.
Being at the forefront of digital payment solutions is nothing new. China has had chat app based payment system for quite sometime now. What may be different now is China can peg its digital currency against gold or Bitcoin that can be redeemed for either gold or bitcoin.
That’s what China tried to do with gold backed futures contract to undermine the dollar
Dominance, although unsuccessful.
Remember, most currencies are true Fiat. That means, they mean nothing except the trust that people place in them. When a digital currency that will potentially be accessed anywhere is backed by redeemable gold or bitcoin, then that will draw a lot of attention.
US reign over the world is partially dependent on US Dollar being the world’s standard Currency.
If they cannot bring their own digital currency fast enough, they can have someone like Facebook who already has access to 1.7 Billion user base to peg against USD which will ensure that USD is still the most widely used currency in the world.
This article is in direct contrast to what I said in a previous article about how Facebook’s premature attempt to circumvent the legislation backfired.
That is still the case, however, as we move forward, Facebook’s checkbook will start coming into play.
It already did show how powerful money is with 5 Billion dollars in fine for screwing people up with their privacy breaches. Goldman Sachs is the only other company that paid billions in fines for screwing the hard working American financial lives in 2008.
Once US approves of Libra for political reasons rather than on technological grounds, other countries will follow the suite.
Thank you for reading the article.
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About the author
RK Reddy holds two Masters degrees, one in Accounting and another in Business Administration with over 15 years of experience in the financial services industry.