The crypto revolution is failing
It was supposed to destroy the financial elite — but has only made them stronger
BY GREG BARKER
. Silicon Valley has won (Andrey Rudakov/Bloomberg via GettyS)
September 3, 2021
Wall Street, the Federal Reserve and the financial arm of Silicon Valley can’t believe their luck. The cryptocurrency movement, the very rebellion that set out to defeat their hegemony, has provided them with the necessary technology to become even more dominant.
When Bitcoin, the first ever cryptocurrency, was launched in 2008, it was hoped its “Blockchain” technology — which records transactions and cannot be hacked — would spark a digital revolution. If a transaction could be carried out securely without the need for an established bank, it would, we were promised, mark the end of corporate capitalism — and the dawn of a new era of decentralisation.
Just over a decade later, however, Blockchain has become the centre of the financial elite’s new-age banking system. Indeed, behind the scenes, they’re going all in on crypto.
Using its very own cryptocurrency, the world’s largest bank JPMorgan has completed its first “interbank crypto trade” with fellow Wall Street titan Goldman Sachs. They carried out the transaction of JPMCoin, JPMorgan’s version of a digital dollar, using its new blockchain system. And with more than a dozen institutions now signed up to it, exchanging more than $1 billion daily, a digital financial revolution is in the making.
Ordinary citizens, however, won’t be part of it. When it was first conceived, crypto’s leading advocates insisted that we had entered a new era of financial autonomy: all you needed to defeat crony capitalism was a Bitcoin wallet and an internet connection.
But in reality, the crypto rebellion has failed to liberate us, or achieve anything else its founder Satoshi Nakamoto envisioned. Rather than producing a more open, more liberating, more financially free society, the crypto movement has empowered not just another cabal of corrupt financiers, but a hidden cartel of criminals, Wall Street rejects, and what U.S Senator Liz Warren has described as “shadowy super-coders”.
Its prominent members continue to run rampant around the globe, circumventing laws, regulations and ethics to accumulate multi-billion dollar fortunes. Not a single country appears to want to host crypto-billionaire “CZ” and his company Binance, the biggest cryptocurrency exchange platform in the world. Meanwhile, Brock Pierce, the billionaire co-creator of cryptocurrency Tether, is currently using his wealth to engage in “crypto colonialism” in Puerto Rico, where dozens of “entrepreneurs” hope to build a new city that only uses virtual money
Wall Street, the Federal Reserve and the financial arm of Silicon Valley can’t believe their luck. The cryptocurrency movement, the very rebellion that set out to defeat their hegemony, has provided them with the necessary technology to become even more dominant.
When Bitcoin, the first ever cryptocurrency, was launched in 2008, it was hoped its “Blockchain” technology — which records transactions and cannot be hacked — would spark a digital revolution. If a transaction could be carried out securely without the need for an established bank, it would, we were promised, mark the end of corporate capitalism — and the dawn of a new era of decentralisation.
Just over a decade later, however, Blockchain has become the centre of the financial elite’s new-age banking system. Indeed, behind the scenes, they’re going all in on crypto.
Using its very own cryptocurrency, the world’s largest bank JPMorgan has completed its first “interbank crypto trade” with fellow Wall Street titan Goldman Sachs. They carried out the transaction of JPMCoin, JPMorgan’s version of a digital dollar, using its new blockchain system. And with more than a dozen institutions now signed up to it, exchanging more than $1 billion daily, a digital financial revolution is in the making.
Ordinary citizens, however, won’t be part of it. When it was first conceived, crypto’s leading advocates insisted that we had entered a new era of financial autonomy: all you needed to defeat crony capitalism was a Bitcoin wallet and an internet connection.
But in reality, the crypto rebellion has failed to liberate us, or achieve anything else its founder Satoshi Nakamoto envisioned. Rather than producing a more open, more liberating, more financially free society, the crypto movement has empowered not just another cabal of corrupt financiers, but a hidden cartel of criminals, Wall Street rejects, and what U.S Senator Liz Warren has described as “shadowy super-coders”.
Its prominent members continue to run rampant around the globe, circumventing laws, regulations and ethics to accumulate multi-billion dollar fortunes. Not a single country appears to want to host crypto-billionaire “CZ” and his company Binance, the biggest cryptocurrency exchange platform in the world. Meanwhile, Brock Pierce, the billionaire co-creator of cryptocurrency Tether, is currently using his wealth to engage in “crypto colonialism” in Puerto Rico, where dozens of “entrepreneurs” hope to build a new city that only uses virtual money
.
A cryptocurrency mining farm in Norilsk, Russia (Andrey Rudakov/Bloomberg via Getty Images)
Sensing this rising elite is getting a free pass, the world’s financial power structures have responded with a regulatory hailstorm. And as it has intensified, the more “controversial” outlets have tried to meet regulators’ demands.
Binance has tried to appear more credible by “looking at the potential IPO route” and appealing to regulators, while BlockFi, a cryptocurrency lender that matches all the Securities and Exchange Commission’s criteria for a Ponzi scheme, has had to obey securities laws to continue operating in the US, with five states — New Jersey, Alabama, Texas, Vermont and Kentucky — striking the fintech company with either cease and desists (requests to stop alleged illegal activity) or show-cause notices (proof that they are not a scam).
As for the bosses of ill-famed Tether, they recently appeared on CNBC, trying to convince everyone that their currency has a one-to-one backing — for each Tether in circulation, they claim to have $1 in their reserves backing it up (though still won’t perform an audit of their reserves).
Since the US Government has come down hard on any entity not playing ball, some of the crypto elite have started to question whether true decentralisation is a delusion. Indeed, they are starting to realise that it is a lot easier to build a fortune — and keep it — when they participate in the “official” system and follow the rules.
SUGGESTED READING
Bankers are running the country
BY PETER FRANKLIN
It’s the same realisation Peter Thiel had in 1999. Back then, his original vision for PayPal was to create a truly anonymous money-transfer system, free from state influence and control. “It will be nearly impossible for corrupt governments to steal wealth from their people through their old means,” he declared, before quickly backtracking and rising through the ranks of Silicon Valley.
Fast forward to today, and the crypto elite have mimicked Thiel’s change of direction. Rather than simply throwing in the towel and admitting the game is up, they have abandoned their cyber-libertarian roots and merged with their enemy: the financial behemoths of Wall Street, the Federal Reserve and Silicon Valley.
It’s easy to see why this would seem appealing; a number of crypto elites are already reaping the rewards of cosying up to the establishment. Jeremy Allaire’s Circle — the company behind the huge, unaudited cryptocurrency USDC — has partnered with Silicon Valley payment giants, Mastercard and Visa. Meanwhile, Brian Armstrong, the CEO of cryptocurrency exchange Coinbase, revealed in a tweet in May that he’d held meetings in D.C with high-ranking state officials, including Congresswoman Nancy Pelosi and Federal Reserve Chair Jay Powell.
All of which raises a peculiar question: Why is the Federal Reserve’s head honcho, Bitcoin’s supposed arch-enemy, collaborating in undisclosed meetings with the CEO of crypto’s main cashier? In Bitcoin Gospel, that’s heresy.
The answer lies in what I suspect are the crypto elite’s real intentions: namely, that they were never really in it for the freedoms Bitcoin could offer, but more for the untold riches it promised. Now they’ve succeeded, it’s all about wealth preservation, and in the age of bailout capitalism, becoming “too big to fail” is the ultimate protection. That is why getting in the good books of Wall Street and the Federal Reserve seems to be the top priority for crypto billionaires. If a crisis emerges, and they threaten to bring down the existing power structure’s financial order, guess what? They’re first in line for a taxpayer-funded bailout.
Right now, it seems inconceivable that the financial elites would bail out the crypto market. But as the bubble gets bigger and becomes tied to Wall Street through its investments, the likelihood increases.
SUGGESTED READING
Is community crypto the future of money?
BY DAVID Z. MORRIS
Take Tether, for example. On top of its $63 billion market cap, half of its reserves are now backed by real-world debt securities issued by Wall Street companies. Given it is a modern wildcat bank, one that issues its own currency, and has failed to provide any proof its assets exist, it is unlikely we will ever know how much debt Tether owns. But if it’s revealed that Tether’s value is, in fact, a swindle, Wall Street could eventually face losses amounting to more than a slight haircut.
In which case, don’t be surprised when the Federal Reserve comes to its rescue. It’s easy to forget that Wall Street can’t be distinguished from the Federal Reserve; the financial elites know that if something goes wrong, Jerome Powell, chair of the Federal Reserve, will be there to step in and bail them out at whatever cost.
And if the next crypto crash does threaten to bring down their system, if wildcat banks like Tether become too big to fail, our current financial power structures will do everything they can to ensure that the status quo is maintained. Two classes of elites will become one, with the “less desirable” parts of the crypto world — and likely the taxpayer’s purse — becoming collateral damage.
What happens next is anyone’s guess. But with the likes of Goldman Sachs combining forces with such unsavoury characters in the crypto elite, it is not impossible to imagine them wreaking havoc around the globe: charging clients obscene crypto fees and betting against their own Bitcoin products to make even more money. The rest of us, meanwhile, will watch on from afar, knowing that we’re powerless to stop or escape yet another era of financial repression.
Sensing this rising elite is getting a free pass, the world’s financial power structures have responded with a regulatory hailstorm. And as it has intensified, the more “controversial” outlets have tried to meet regulators’ demands.
Binance has tried to appear more credible by “looking at the potential IPO route” and appealing to regulators, while BlockFi, a cryptocurrency lender that matches all the Securities and Exchange Commission’s criteria for a Ponzi scheme, has had to obey securities laws to continue operating in the US, with five states — New Jersey, Alabama, Texas, Vermont and Kentucky — striking the fintech company with either cease and desists (requests to stop alleged illegal activity) or show-cause notices (proof that they are not a scam).
As for the bosses of ill-famed Tether, they recently appeared on CNBC, trying to convince everyone that their currency has a one-to-one backing — for each Tether in circulation, they claim to have $1 in their reserves backing it up (though still won’t perform an audit of their reserves).
Since the US Government has come down hard on any entity not playing ball, some of the crypto elite have started to question whether true decentralisation is a delusion. Indeed, they are starting to realise that it is a lot easier to build a fortune — and keep it — when they participate in the “official” system and follow the rules.
SUGGESTED READING
Bankers are running the country
BY PETER FRANKLIN
It’s the same realisation Peter Thiel had in 1999. Back then, his original vision for PayPal was to create a truly anonymous money-transfer system, free from state influence and control. “It will be nearly impossible for corrupt governments to steal wealth from their people through their old means,” he declared, before quickly backtracking and rising through the ranks of Silicon Valley.
Fast forward to today, and the crypto elite have mimicked Thiel’s change of direction. Rather than simply throwing in the towel and admitting the game is up, they have abandoned their cyber-libertarian roots and merged with their enemy: the financial behemoths of Wall Street, the Federal Reserve and Silicon Valley.
It’s easy to see why this would seem appealing; a number of crypto elites are already reaping the rewards of cosying up to the establishment. Jeremy Allaire’s Circle — the company behind the huge, unaudited cryptocurrency USDC — has partnered with Silicon Valley payment giants, Mastercard and Visa. Meanwhile, Brian Armstrong, the CEO of cryptocurrency exchange Coinbase, revealed in a tweet in May that he’d held meetings in D.C with high-ranking state officials, including Congresswoman Nancy Pelosi and Federal Reserve Chair Jay Powell.
All of which raises a peculiar question: Why is the Federal Reserve’s head honcho, Bitcoin’s supposed arch-enemy, collaborating in undisclosed meetings with the CEO of crypto’s main cashier? In Bitcoin Gospel, that’s heresy.
The answer lies in what I suspect are the crypto elite’s real intentions: namely, that they were never really in it for the freedoms Bitcoin could offer, but more for the untold riches it promised. Now they’ve succeeded, it’s all about wealth preservation, and in the age of bailout capitalism, becoming “too big to fail” is the ultimate protection. That is why getting in the good books of Wall Street and the Federal Reserve seems to be the top priority for crypto billionaires. If a crisis emerges, and they threaten to bring down the existing power structure’s financial order, guess what? They’re first in line for a taxpayer-funded bailout.
Right now, it seems inconceivable that the financial elites would bail out the crypto market. But as the bubble gets bigger and becomes tied to Wall Street through its investments, the likelihood increases.
SUGGESTED READING
Is community crypto the future of money?
BY DAVID Z. MORRIS
Take Tether, for example. On top of its $63 billion market cap, half of its reserves are now backed by real-world debt securities issued by Wall Street companies. Given it is a modern wildcat bank, one that issues its own currency, and has failed to provide any proof its assets exist, it is unlikely we will ever know how much debt Tether owns. But if it’s revealed that Tether’s value is, in fact, a swindle, Wall Street could eventually face losses amounting to more than a slight haircut.
In which case, don’t be surprised when the Federal Reserve comes to its rescue. It’s easy to forget that Wall Street can’t be distinguished from the Federal Reserve; the financial elites know that if something goes wrong, Jerome Powell, chair of the Federal Reserve, will be there to step in and bail them out at whatever cost.
And if the next crypto crash does threaten to bring down their system, if wildcat banks like Tether become too big to fail, our current financial power structures will do everything they can to ensure that the status quo is maintained. Two classes of elites will become one, with the “less desirable” parts of the crypto world — and likely the taxpayer’s purse — becoming collateral damage.
What happens next is anyone’s guess. But with the likes of Goldman Sachs combining forces with such unsavoury characters in the crypto elite, it is not impossible to imagine them wreaking havoc around the globe: charging clients obscene crypto fees and betting against their own Bitcoin products to make even more money. The rest of us, meanwhile, will watch on from afar, knowing that we’re powerless to stop or escape yet another era of financial repression.
Greg Barker is an independent journalist and quant, who also writes under the name Concoda. You can find him on Substack and Twitter at@concodanomics.
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