When Elizabeth Warren Supports Digital Currencies, You Know Something Is Up

when-elizabeth-warren-supports-digital-currencies,-you-know-something-is-up

A decade ago, digital currencies were still being viewed with skepticism. While Bitcoin and other cryptocurrencies had a following among young, technologically adept people, politicians and regulators viewed them with skepticism. Digital currencies were still seen as a tool for enabling money laundering, terrorist financing, and various other forms of criminal activity. Central banks and governments thought that digital currencies had nothing to offer, and as a result they ignored them, thinking that they would eventually disappear like a flash in a pan.

Fast forward to today and it’s clear that digital currencies are here to stay. Bitcoin has established itself as a force to be reckoned with, traded on numerous exchanges throughout the world. Bitcoin futures have even made the leap to mainstream commodities exchanges, and now are even being offered as an investment option for retirement accounts. Far from being fringe, cryptocurrencies are now firmly entrenched as part of the mainstream.

The attitudes of regulators and politicians have changed during that period as well. US authorities had long taken a hands off approach to Bitcoin and cryptocurrencies, waiting to see what kind of markets would develop. And when it became clear that cryptocurrencies were here to stay, regulatory agencies had to scramble to bring the new technology under the existing regulatory regime.

But while cryptocurrencies saw increased use from consumers and businesses, the government and the Federal Reserve System saw no need for a digital currency of their own. That is, until recently.

What Spurred the Fed?

At one time Fed officials expressed great skepticism about the utility of digital currency. And Fed officials were very clear that the idea of a central bank digital currency (CBDC) was something that the Fed would never consider. But all that has changed.

One major impetus behind that change in thinking was the creation in China of the digital yuan. China had been a major adopter and driver of cryptocurrency, as individuals in China quickly caught on to the benefits of Bitcoin and other digital currencies. But the Chinese central bank saw that adoption of cryptocurrencies as a threat to its ability to manage monetary policy and maintain control over the value of the yuan.

As a result, Chinese authorities cracked down on both usage and mining of cryptocurrencies, trying to strangle the Chinese market for private digital currencies. At the same time, the People’s Bank of China (PBOC) decided to work on its own digital currency, the digital yuan.

Testing of the digital yuan began in numerous cities in China in 2020 and has expanded to even more cities. And as the benefits of the digital yuan to the Chinese government became apparent, the Fed was forced to change its tune.

Fed officials realized that if cryptocurrency usage were allowed to continue unfettered, there was a very real possibility that private cryptocurrencies could one day supplant any homegrown CBDC, due to the first mover advantage posed by Bitcoin and other cryptocurrencies. And with China moving to adopt a CBDC, the Fed likely felt that it had no choice but to develop its own CBDC.

Even opponents of cryptocurrencies such as Elizabeth Warren are now calling for the US to adopt a CBDC, and that’s concerning on a number of levels. Those who opposed cryptocurrency but who now support a CBDC aren’t supporters of financial privacy. Much like the Chinese government, they realize that a CBDC can offer the government greater control over your money.

The Origin of Cryptocurrencies

Cryptocurrencies were born in the aftermath of the 2008 financial crisis. Bitcoin itself was developed to be a form of “digital gold.” It was “mined” through a complex process requiring copious amounts of computing power. Its output was strictly limited, with fewer and fewer bitcoins being produced as time goes on.

Bitcoin and similar cryptocurrencies were purposely decentralized, with no single issuer who could unilaterally decide to increase the supply of currency. In essence, cryptocurrencies were created to overcome all the disadvantages inherent with a central bank currency such as the US dollar.

Once central banks created CBDCs, they eliminated all the advantages of cryptocurrencies. The central bank now gets to control how many units of currency are created, and it can create additional units of currency virtually ad infinitum.

The central bank can also track where these units of digital currency are being used, and can associate units of currency with both individuals and transactions. So using a CBDC will very likely allow the government to know exactly what you’ve bought and how much you’ve paid for it.

Progressives like Elizabeth Warren love the idea of CBDCs because they allow the government greater control over your money. No longer would you be able to hide your financial transactions from the government. Now everything will be right there for the government to see.

Didn’t pay taxes on that set of Beanie Babies you sold on eBay? Well, now the government will be able to see that you owe taxes on it and make sure that it gets its cut. Paid your landscaper with a CBDC? The government knows that too, and will make sure you’ve also paid the various taxes you’re required to pay as an employer.

With a CBDC, everything you buy or pay for will be seen by the government. And with the government controlling CBDC issuance, the money you think you own could potentially be taken away by the government too at the click of a mouse.

Gold’s Defense Against Government Overreach

The push towards CBDCs is here, and it could only be a matter of time before all of us are forced to abandon cash and use the digital dollar. The only good thing is that the Fed is behind the curve, and it could be at least a few years before a digital dollar is forced upon us.

That gives you plenty of time to prepare and defend yourself against the disadvantages that would come along with a CBDC. And one way you could help protect yourself is by owning gold.

Gold has long served as a protector of wealth against governments that want to tax and confiscate wealth. And it has helped people maintain their wealth not only from prying governments but also from economic turmoil.

With a gold IRA, you can roll over or transfer assets from your existing 401(k), 403(b), TSP, IRA, or similar retirement accounts into physical gold coins or bars. And when you decide to take a distribution from your gold IRA, you can take that either in cash or in physical gold.

In a world that is increasingly digital, and in which digital currencies will make it easier for governments to control and possibly even seize your assets, ownership of physical assets such as gold could play an important role in maintaining your financial independence.

Don’t let your hard-earned assets fall victim to a future digital currency scheme. Call Goldco today to learn more about how gold can help safeguard your savings.

The post When Elizabeth Warren Supports Digital Currencies, You Know Something Is Up appeared first on Goldco.

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About the Author: Paul-Martin Foss