32
It is looking like the SEC's war on crypto is starting to spread to new battlegrounds. The Commonwealth Bank of Australia in Australia, yea that is right it is in Australia, just making sure everyone got that. Are reporting it will stop some transactions and payments. All to "protect" you the customer.
The Commonwealth Bank of Australia
They recently announced that they will limit payments to some cryptocurrency exchanges that they consider to be "high-risk" exchanges. The bank has not specified which exchanges they consider to be "high-risk" exchanges. Al they have said is a sort of blank statement that it is being done to "protect" its customers from potential frauds and scams. As well as to comply with current anti-money laundering and counter-terrorism financing regulations. They are not the first Australian bank to do this.
The tactics used by the government to combat crypto
What we see happening in Australia at The Commonwealth Bank of Australia, yea that one down under in Australia. This is one of the textbook examples of how governments are either trying to wrestle control over crypto or outright kill it. But let us take a look at some of the things they claim and see if we can get a better understanding of their playbook.
First out I would like to take a look at the "we do this to protect you" argument. This is most commonly used by Banks and other financial institutions. Under the guise of them "protecting you," they are actually saying "you can't use your money to do what you want with it, you can only use it for things we say is ok". At least to me, that is looking like a really bad deal, first of the banks are not doing us the small people any favors to start with. And now they want to dictate what I can and can not do with my money.
If we look at crypto and what one of the main benefits of it is. It is to give back the freedom to you, me, anyone. To do and use their money, however, they like. To mean this is just one more strike against the banks, and them showing who they are backing. And again it is not their big userbase. The whole argument they are making that they are doing this to protect you, to me, seems to be backward. It is the same as if you banned people from buying candies because some people use them to lure and kidnap children. So we are doing it to protect you. It does nothing to solve the real issue, that people are luring away and kidnapping children. They will keep doing it, but now they will use toys instead of candy. So I guess we better ban toys now as well. Or we can try and get to the problem and try and stop the bad people.
It is virtually the same thing and the same type of argument as what the banks are claiming. They want to protect you from fraud and scams. How will they do that, not by stopping the frauds or scams but by shackling you and stopping you from being able to participate? It is like you are the bad guy now all of a sudden. I know it is far from exactly the same, but it was the closest I could think of. So I hope I do not offend anyone by making this comparison. It is close to how rape victims often get victim blamed. Did you wear a sexy outfit and so on? Again not making light of the situation, just trying to make a point.
Is your money dirty, I can take care of it for you
Moving on to the money laundering argument. Well, laundering money is bad because it helps criminal enterprises clean their money. I wonder what the criminals did before 2009 when crypto was first introduced. Hum, will you look at that, it looks like banks were used. No that can't be right, they clearly are following the rules and regulations. No, it is definitely banks. The absolute biggest money laundering scheme took place between 2007 and 2015 and they laundered €200 billion, $230 billion. A nice round number there. $230 billion dollars...
If we take a look at crypto, thanks to the blockchain and the ability that anyone at any time can see how the crypto is distributed, having an exact market cap is possible. The total market cap for cryptocurrencies reach an all-time high in November 2021, if I am not mistaken, and then it was just over $3 trillion. Currently, we are sitting at just over $1 trillion in total market cap. If we use the ?230 billion from 2015, we have to adjust it for inflation. And if we assume all of it was launders in 2015 that puts the new total at $299 billion. If we then compare this to the al time-high market cap it is a staggering ~10%, and with today's market cap it is close to 30%. And I can feel pretty confident to say that 30% of the current crypto market cap is not laundered or used for laundering money.
The image shows a pie chart of all the funds deposited into Tornado Cash since it opened its doors in 2019
But that does not say that crypto is not used by criminals. But if we take a look at the most recent, and most likely biggest, case of money laundering. The Tornado Cash case. There the government claimed Tornado Cash, a crypto mixer, was used to launder $7 billion. But when analysts took a look at the funds deposited from its inception. At most 28% of the funds it received were from "questionable" sources. Meaning that if we round up it is $2 billion.
And again we circle back to if you shut down crypto, will that stop money laundering? No, it won't. Will that throw a wrench into some bad actors' plans, certainly. But the same would happen if you closed all banks. That would throw a wrench in the plans of some bad actors as well. If you really want to make a dent in money laundering. Then I would suggest the persons in charge took a closer look at the global banking system instead. Or better yet, try to come up with some better rules to try and stop criminals. Like asset seizure or something else along those lines.
Funding terrorism
Doing a little research and googling to try and better understand and learn how terrorists are funding their operations. What popped up, lo and behold, was not crypto, crypto, and crypto. But sure crypto can be used to facilitate most, if not all schemes. Just like normal money can. Are you starting to see a pattern here?
Click to make it bigger or go
Depending on your level of European history this chart may or may not come as a shock to you. And let us make things clear things in Europe are not the same as in the rest of the world. I looked at Wikipedia for stats of the US, and for the same time period as the chart above, from 1970 to 2017, there were a total of 131 acts of terrorism. My point is simply that Terrorism is no new thing, unfortunately. We, humans, have always been good at doing harm to ourselves.
But if we want to try and we'll terrorism, at least I think the best way is to try and understand why it is happening. And that is no easy "one thing fixes all" situation. If we take a look at Europe we can see two major players. The IRA and the ETA. We can see that in these two cases, they had similar motives behind their acts of terror. Mainly to unify and free Ireland from the British (fighting for Northern Ireland) when it came to the IRA. And with ETA it was to try and get the Basque region in Spain and France to become an independent country. But only by trying to understand each situation as its own thing do I believe we can stop the continuation in that region. But I also get that in some cases that might be easier said than done.
Regarding whether global terrorism is on the rise or decline, I can't really say. Mostly because the data is too much for me to sift through. But if I take a look at the EU it at least looks to have been in decline, even if there are a few incidents in recent years. The number is well lower than it where compared in the 1970ies.
But I will say again, my point is simply to show that terrorism was alive and well way before crypto, and most likely it will be alive and well after crypto is gone. You know what I mean, I don't want crypto to be gone, obviously. My point is again that in order to try and help and stop or at least mitigate it, you need to actually deal with the cause. And killing crypto will not stop terrorism. If it would I would gladly drive the stake through the heart of the crypt myself.
Tax evasion, it got Capone!
This is one of the main arguments of the government. The terrorism one is also often used. But I think this one is the number one argument made by them. Crypty helps people to evade taxes. A fine example of this was Joe Bidens magical $18 billion tax crypto loophole he claimed existed. But no one really could say where it was or how to get there.
Al Capone was very bad, he did tax evasion. You do not want to be like him now, do you?
But it is a drum the government like to beat over and over. And while my personal stance most likely is contrary to most others in the crypto space. I actually am pro taxes. As long as they are used to build up the welfare state, and not used for subsidizing the rich or other stupid stuff. But this is neither here nor there. But I do want to tell you about my time working at the IRS.
When I was at the IRS one of the case officers there got a case where a woman living abroad was trying to make an interest deduction. If you have a loan, you get to make deductions based on the interest of it. It is so people more easily can afford to buy a house. The interest she claimed was due to her living off of a credit card. As she had her money "locked up" and where not able to easily access them. She provided statements showing the interest was ~$30,000 that year. Yes, the interest alone. My friend thought this was rather peculiar, as the woman had no assets declared. So what money was it she was living off of? He flagged the case and sent it up the food chain. It fairly quickly got back to him with the instructions to let it go. That was not the task at hand. He where only to investigate the given claim and not look any further. The whole thing actually upset him so much that shortly after this he resigned.
My point is that there are many fishes in the tax evasion sea. But it appears that some fishes are very protected for some strange reason. But other fishes, trying to make a to-and-from-work gas reduction for $2,000, those fiches need to be pulled up on land and beaten with a club to death. Another example of how things can be very different is this. Back at around 2000, I can't really remember exactly and can't find any post on it either. The IRS said they needed money to stop the rampant tax evasion that was going on. The government said of course, because tax evasion is super bad. *bong, bong* the sound of the drum echoes. They got a few million to spend to try and get the cheaters. The result, well the IRS actually had to take their had in hand and report that the rampant tax evasion they were going to fix was nonexistent, opsi.
We then put this in contrast to the aftermath of the Panama Papers leak. What did the IRS do then? Well, go-out clubbing was definitely not on the table. Go after the persons in the paper, well and I think we rather not do that as well. What we will do however is one of the executives at the IRS will phone their friend and warn them that the investigative journalists are looking into them for tax evasion. That just happens to be a special service they provide to some of the fishes that are more and better fishes than others. But it is not done there. Also, they made a special ruling stating that if you returned the money you had hidden abroad, and paid a flat one-time tax on it, then you were off the hook for any legal replications. Sounds about right.
And in case you were wondering, the tax deduction on the numbers I listed, the $30k and the $2k, it is "only" 30% of that is deductible, just a quick FYI.
How to combat the FUD
They will use any FUD argument no matter how few of the whole group that is involved. As long as one is, in their eyes, it might just as well be everyone. And of course, YOU don't want to support those types of criminal things now, do you? If this rhetoric sounds familiar it is because it is standard fearmongering. The classic divide and concern tactics used by many politicians to gain power, we must build a wall to keep all the criminals and rapist Mexicans out ring any bells? The idea behind it is the same, people who use crypto are bad and only use it to evade taxes, scam people, and fund terrorists. And you don't want to support that, right?
US Government FUD Playbook
Sadly it is a playbook that is very, very effective. If we look at history we can see just how effective if we look at Germany in the 1930ies. But if we really want to see the most "powerful" example we need to look at Italy during the same period. This idea is very much the core philosophy of Fascism. But the key difference there is you need to have as big an "ingroup" as possible and as small an "outgroup", bad people, as possible. Because the more people you get that can feel a part of the ingroup the stronger it can be.
This is also why bullying can have such a devastating effect. One person gets singled out and targeted by 25 classmates on a daily basis. Not to mention all others who will jump on the bandwagon. But this also shows you that the weakness is in the numbers. Meaning that if half the kids at school have glasses, it becomes very hard to bully one kid because they got glasses. If we now swap classes for people who use crypto. And we then try and argue people who use crypto only do it to fund terrorism and to evade taxes. It is not that easy now that half the class uses crypto and says they don't tax evade or fund terrorism. Compared to if only one in the class said it.
That means that the easiest thing to do to try and combat the FUD arguments used, therefore is to spread the use of crypto. The more people who know about and use crypto the harder it will be for these FUD arguments to be effective. Because the more people who know of, and use crypto the more people will be able to know and see the arguments for what they truly are. They are no magic hotfix to patch away a problem like terrorism or tax evasion. There is no silver bullet the government has. I mean if they have why the f-k have they not used it earlier?
I hope that this has brought some clarity and dispelled some of the FUD arguments used against crypto in this "war". But I would also end by saying that these most likely will not be the only FUD arguments used. As more or less any FUD argument will do. The most powerful one is perhaps "pedophilia". You don't want to support something that pedos use do you now? The latest instance where this argument where used was in the EU parliament where they proposed to be able to surveil all mobile traffic of everyone in the EU because pedos send things to each other. That was a no-go so we managed to kill that bill at least temporarily. But know that when the pedo argument shows up, that means they mean business.
What are your thought on this, have I made any glaring errors or mistakes in my arguments? Or have I perhaps missed something obvious? If so please let me know in the comment section. And also share your thoughts on these topics. Perhaps you have another good example of a government using a FUD argument, if so I would love to hear about it.
If you would like to support me and the content I make, please consider following me, reading my other posts, or why not do both instead. I have also just become a partner at , signing up using my referral link or just following me there is also a great way to support me.
https://medium.com/@bo.daniel.jensen/membership
See you on the interwebs!
Picture provided by: Fair use
