Crypto Market Commentary
1 October 2019
Doc's Daily Commentary
The 9/26 ReadySetLive Update with Mav is listed below.
Mind Of Mav
Should The US Tokenize The US Dollar?
Anthony Pompliano is the king of Bitcoin hyperbole.
But, sometimes he says things that really leave me thinking.
I still reference his medium article, “The SEC will mandate Security Tokens”, as one of the seminal pieces on security tokens and their eventual role in modernizing the private equity market.
So, suffice to say I believe he made another proclamation worth exploring in an article (and CNBC interview) this week: “The US Should Tokenize The Dollar Immediately”
“The United States can’t become the most effective military in the cyber world, unless it was willing to completely decentralized it’s networks and currency ownership. However, the country can become more transparent and more globally adopted.
Transparency will be the hardest idea to sell to government leadership, because true transparency is not selective. It will give insight into what the Federal Reserve is doing, what politicians are paying who, and general flow of funds throughout the market.
But the one aspect of this argument that most people will agree upon is adoption. If someone can more easily get access to the Chinese Yuan compared to the US dollar, then the US dollar will be at a disadvantage. There won’t be a competition between digital and non-digital currencies in the future. Every currency will be digitized.
The true competition is going to come at the monetary policy level. The United States has a head start here, so tokenizing the dollar would likely provide more cushion from disruption, but even that action will ultimately be futile in my opinion. People are going to opt for a currency that can’t be seized, censored, or debased.
People are going to choose to store their wealth in Bitcoin.”
So, needless to say, this is highly interesting due to the radical implications at stake here.
First, we should address that, while it is true that China is creating a digital currency, they have no set timeline in place. I consider their efforts their to be a hedge against further trade war escalation.
Second, it should be noted that there’s some confusion as to what constitutes digitization vs. tokenization. It’s true that digital fiat is certainly widespread in both major countries, and between Wechat, Alipay, Venmo, Paypal, and many other banking services digital fiat is already a major part of people’s lives.
Here’s what Jeremy Allaire defined tokenized fiat by:
Allaire believes that the world is headed toward a system of cheap, instant monetary transactions with traditional, fiat money — regardless of which countries happen to launch digital fiat money. Moreover, he thinks that this will be a radical change in the way that payment systems, the monetary system and economic interactions at large will work.
Allaire explained that he does not think digital currencies will simply be tokenized via blockchain, but otherwise operate the same as they do now. Instead, he predicts that global money tokens, backed by baskets of reserve currencies, will emerge and become the preferred monetary model.
But let’s center this around the US Dollar Tokenized Fiat (USDTF).
A government-distributed coin could create wealth for America by leveraging America as a dominant player in the cryptocurrency game . . . or so goes the theory proposed in a blog post by Silicon Valley investor and OpenAI co-chairman Sam Altman:
“I think the first superpower government to do something like this will have an enviable position in the future of the world, and some power over a worldwide currency.
The US government could decide to treat USDC as a second legal currency, which would be hugely powerful. (I think the US doing this would be significantly more impactful than the smaller governments thinking about it now.)
USDC could require that certain transaction can only happen with wallets with known owners. It could even build a tax system into the protocol.
A tricky part of this would be how to balance letting the network have control over itself and letting the government have some special degree of input on ‘monetary policy’. It’s certainly ok for the government to have some, but I think the network needs to be mostly in charge (e.g., the government couldn’t be allowed to arbitrarily inflate the currency when it wanted to).
The current practices seem to be for governments to mostly ignore cryptocurrency and cryptocurrency enthusiasts to mostly ignore government, which seems to me to be unsustainable in both directions. But I believe there exists a middle ground where the government can get a lot of what it wants, and cryptocurrency users can get a lot of what they want too.
The government can likely create a lot of de novo wealth for its citizens in the process.”
Certainly, with more regulations likely to appear over cryptocurrencies and Blockchain technology down the road anyway, getting the government involved in a mutually-beneficial arrangement is far better than regulating decentralized currencies into irrelevance.
Creating a virtual currency and embracing crypto wallets could be a good move for America on a practical level, too — the Federal Reserve allocated over $860M to create paper money in 2018, and that doesn’t even account for how much it costs to create coins, or the money lost because of (or spent enforcing actions against) counterfeit dollars and coins.
But, a few catches, here: One in four Americans still don’t have a smartphone, according to the Pew Research Center. And only 70 percent of Americans have access to broadband. And it’s unlikely that a national cryptocurrency would be able to take off until everyone has cheap and reliable access to both. And that might take other solutions to the vast wealth inequality gap among Americans that a national digital currency was supposed to fix in the first place.
These problems don’t mean that a nationally-endorsed cryptocurrency could never work — down the road, it might be a valuable and worthwhile investment for the federal government. But right now, there are too many hurdles in the way of anything like it helping anyone but the people who already have the expertise and capital to invest.
Still, the idea is compelling, and could be where we see the ideas of cryptocurrency and blockchain start to really blossom.
Needless to say, the future is represented by a synthesis of centralization and decentralization.
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An Update Regarding Our Portfolio
We are pleased to share with you our Community Portfolio V3!
Add your own voice to our portfolio by clicking here.
We intend on this portfolio being balanced between the Three Pillars of the Token Economy & Interchain:
Crypto, STOs, and DeFi projects
We will also make a concerted effort to draw from community involvement and make this portfolio community driven.
Here’s our past portfolios for reference:
RSC Managed Portfolio (V2)
RSC Unmanaged Altcoin Portfolio (V2)
RSC Managed Portfolio (V1)