Cryptocurrency may be one of the biggest threats to governments, security and the entire financial system that we’ve ever seen. It can help fund terrorism and its anonymity makes it almost impossible to track. Most importantly, it is poised to revolutionize global finance and banking.
But our new
Enemy No. 1 can’t be fought; it can perhaps be controlled. Banks have figured
that out and are bringing crypto currency into the fold.
The
superpowers—U.S., China and Russia–will have to face the new reality. They love
to hate it and hate to love it. Regardless, if they don’t embrace it, they
won’t be able to control it. An enemy you don’t control is a much bigger
threat.
So, welcome
to the new balance of power, funded by cryptocurrency.
“This will
‘uberize’ banking to the extent that the major banks are spending billions to
get into this Blockchain, says Frank Holmes, legendary gold investor, CEO of US
Global Investors and Chairman of HIVE Blockchain Technologies (TSX:HIVE.V), the first public
company where investors can participate in the build-up and infrastructure of crypto-mining.
“Bitcoin is
the catalyst for crypto-mining the way emails were for the Internet. When we
first heard about the Internet it was for the ‘dark world’, but with email, it
exploded and became mainstream. Ethereum takes crypto-mining further with smart
contracts,” Holmes told Oilprice.com
The Period of Uncertainty is Over
Russia is
embracing it, with an eye to dominating it. China has banned it. The U.S. is
struggling to figure out how to regulate it. But nothing can hold it back.
And now,
many believe the uncertainty is over.
China tried
to ban it in
September, making
it illegal for residents to trade in cryptocurrencies or start-ups to raise
funds through ICOs, completely shutting down local cryptocurrency exchanges.
Bitcoin’s
price plunged 40 percent. Then it recovered almost immediately.
This was a
reminder that cryptocurrency is an autonomous system that can’t be knocked out.
“The ethos
behind blockchain has been tested,” Ken Sangha, COO of Open Money and the Open
Project in San Francisco, told Forbes. “A central, organized and powerful
authority — China — said ‘no’ and we all have been tested worldwide because of
it. But the system flexed its muscles. It’s doing what it was supposed to do.”
And its
muscles are the envy of tangible currencies everywhere. Bitcoin hit a record
$6,000 per coin on 21 October. Naysayers came out of the woodwork to say it
couldn’t possibly last, and definitely couldn’t go any higher. Wrong again. By
the last week of November it was approaching $10,000 a coin.
Threats and Opportunities
The
potential security threats are clear and present, but let’s put things like new
avenues of terrorism funding into perspective.
At this
point, terrorist groups are certainly eyeing their options with cryptocurrency,
and testing the waters. In January, we saw what appears to be the
first case, with the Indonesian government claiming that members of the Islamic
State were transferring Bitcoin to each other.
Terrorists
could create a virtual currency that is even more
powerful and untraceable-one that can completely bypass the global banking system. It hasn’t
happened yet, but the potential is there.
While
terrorist groups may be mildly courting cryptocurrency, it’s not widespread.
Speaking to Newsweek, the Rand Corp’s Joshua Baron, a
cryptographer and mathematician, says he doesn’t really see Bitcoin as the
“go-to currency for terrorists”—yet. “It does not offer enough anonymity.”
While
terrorism is a threat to the security of all states, another threat to the U.S.
is an opportunity for Russia: sanctions busting.
The rise of
digital currency means that Russian officials sanctioned by the U.S. and the
European Union have a way to send
and receive money.
While the
U.S. Treasury’s Terrorism and
Financial Intelligence unit puts sanctioned individuals on a blacklist that keeps them from
doing any business in U.S. dollars, cryptocurrency, which isn’t backed or
controlled by any state, makes it possible to bypass the blacklist.
But even
this pales in comparison to the bigger story here: Bitcoin and its fellow
cryptocurrencies are challenging the foundations of the global banking system.
Disruption
of the global banking system at this point is “inevitable”, Bala Venkataraman,
global chief technology officer of banking and capital markets for Computer
Sciences Corp, whose sister company runs the IT backbone of the National
Security Agency (NSA), told Newsweek.
“Cryptocurrencies
could become the new driver of international business and financial
transactions, and that would be transformative, if not revolutionary,” says Dr.
Makarenko, whose consulting firm advises Fortune 500 companies.
But here’s
the problem:
“If we
don’t truly understand how they are operating, who is controlling them and how
to avoid it being used for illicit purposes, it may inadvertently turn out to
be one of the most innovative turning points in the underworld, whether it’s
organized crime, terrorism financing or corruption.”
The Crypto ‘Embrace’ is All About Control
Just last
year, Russia was toying around with throwing Bitcoin owners in prison, characterizing cryptocurrency as an
infectious pyramid scheme.
Now,
Vladimir Putin’s Russia is ready to embrace cryptocurrency—if only to control
it.
The real
push started in July, when a Putin aide unveiled his
cryptocurrency mine: an industrial-scale server farm called Russian Miner
Coin. In September, the company held an initial coin
offering (ICO), raising over $43 million in Bitcoin and Ethereum.
Then came
the regulatory push. After all, Russia has lost an estimated $310
million this
year alone due to lack of ICO regulation.
In late
October, Putin issued five presidential orders for controlling
cryptocurrency. This means everything from taxing coin miners and regulating
initial coin offerings (ICOs) to creating legislation for new blockchain tech
and setting up a single payment space, presumably with the Central Bank.
Still, the
Russian government is not entirely
unified on the
issue. The Central Bank thinks blockchain is cool, but isn’t keen on
cryptocurrency itself. They’d like to have something like a crypto-ruble that
could track transactions from cryptocurrencies into rubles.
It’s far
more than a fad. Cryptocurrencies are becoming increasingly visible across
Russia. Mining is becoming so pervasive, in fact, that computer stores are
having a hard time keeping graphic and
video cards in supply.
The Russian
Finance Minister, Anton Siluanov, has even gone as far as to say that
cryptocurrency will soon be treated like regular
financial securities.
There’s no
point in prohibiting this reality, says Siluanov.
The U.S.
might be of the same mind—broadly speaking, but it’s moving at a slower pace in
the race to control the world’s new currency.
And it’s
its own worst enemy in this scenario, says Dr. Tamara Makarenko, managing
director of West Sands Advisory, a UK-based global consulting firm.
But Russia,
for one, is much more motivated. Cryptocurrency is a great way to skirt
sanctions.
“The U.S. is
rightfully concerned about cryptocurrencies, but like anything that may have a
negative impact on national security, there are way too many stakeholders that
need to be brought to the table to discuss, so the U.S. is not capable of
acting quickly,” Dr. Makarenko told Oilprice.com.
“The right
conversations are taking place, but at the end of the day, it is in the U.S.
interest to secure the value of the global position of the dollar.”
So, while
China is banning cryptocurrency and the U.S. is still trying to figure things
out, Russia seeks to dominate.
But just
like China’s ban will be largely ineffective, so too will Russia’s move to
dominate. Cryptocurrency is stateless, and that is its real power. It can be
regulated, but not enslaved.
Resilience Proven, Investors Flock to the Future
Right now,
about 85 percent of the world’s bitcoin trading
volume comes from China. Countries with heavily subsidized energy are obvious
ether mining haunts, but now the colder countries have something to offer that
has nothing to do with the government, and doesn’t involve any legal gray areas
that will come under scrutiny.
With even
Putin’s IT advisor getting into the great game, hoping to challenge
China’s hegemony in
Bitcoin mining, the race is on in full force. They’re hoping to capture 30
percent of the
global cryptocurrency mining share in the future.
Japanese
billionaire Masatoshi Kumagai, co-founder of giant GMO Internet,
announced plans recently to invest over $90
million in a
new Bitcoin mining business that will operate as a fund, partially by
soliciting capital from investors and repaying them in cryptocurrency.
In North
America, billionaire backing is going into HIVE (TSVX:HIVE.V), via Lionsgate
Entertainment and Goldcorp (NYSE:GG) superstar Frank Giustra, a legendary mining figure known
for being in the right place at the right time—and always in front of a trend.
The new
Great Game is virtual reality, and while governments are busy trying to figure
out how they can control it, investors are busy sinking billions into what is
fast becoming a story of industrial-scale cryptocurrency mining.
Now that
everyone’s seen how resilient Bitcoin is, not only are things moving to the
industrial phase, but everyone’s weighing the best venues for mining. Because
even though this is virtual reality, location still matters.
That’s why
HIVE has set up in Iceland, where Mother Nature’s natural cooling is friendly
to these massive computing facilities, and where the massive energy required to
mine cryptocurrency—in this case Ether–on an industrial scale is cheaper thanks
to plentiful hydroelectric
and geothermal sources. First, HIVE put $9 million into Hong Kong-based Genesis Mining
Ltd., which just
built the biggest ether-mining facility in the world—Enigma. Genesis
acquired 30% of
HIVE in the deal. A second deal in mid-October saw HIVE close a $30-million
bought deal financing,
completing a $7-million investment by Genesis Mining, acquiring a second data
center in Iceland.
And now
HIVE is setting up in another ‘cold country’—Sweden—with Genesis.
From China
and Russia to North America, virtual is the reality. It’s no longer a question
of whether cryptocurrency will survive. It’s a question of what it will disrupt
on its way to the top of the global finance chain.
***Source: https://oilprice.com/Geopolitics/International/Meet-The-Worlds-Most-Powerful-Bitcoin-Backers.html