Sadly, many in the crypto markets have been ignoring a coming storm, and that storm is coming in the form of tight government regulation meant to cripple crypto currency or bring it under near full control of governments around the world.
After reading the above paragraph, I know many investors will scream “fud” and keep on with their head in the sand, but the news is almost impossible to ignore at this point, and it is forcing us to take a look at what might really happen when governments no longer feel like just playing along with the rise in cryptos. The news has been coming in day after day for weeks now. And all of it has been nothing less than hostile towards crypto. It would be nearly impossible to find a trace of positive news regarding crypto regulation coming out of any first world government.
Two weeks ago I made a post which you can read here where I stated that the position of South Korea on crypto is very bearish, if not outright hostile. The government has stated publicly that crypto can “never” be used as an actual currency within the country. They have not walked backed this statement at all, which is very telling and without much room for interpretation.
Then just today we have two SK exchanges, one being the largest, getting raided by tax officials as well as the police, with paperwork and other documents being seized during the raid according to the New York Times. Once exchanges start getting raided, it is no longer just fud, these are physical actions, not just talk. Investors need to see the difference between officials making off the record statements and actual raids by government agencies. One can be considered fud, the other is real and cannot be ignored as an indicator to determine the government’s true intention. A raid is very different from an investigation. A raid telegraphs that the government believes you have ALREADY committed a crime. A raid does not signal the start of an investigation, it comes at the end.
Next we have China, where an agency within the government has stated they plan on phasing out mining in a slow and orderly fashion. Many people have read this to simply be a sign that they will tax miners and let things go on like business as usual. But there is very little chance this is the case. The government either wants full control of the mining, or they will simply make it illegal through unbearable taxation and regulation.
I’ve heard several well known crypto personalities say that if China bans mining, miners will just go elsewhere. But do you really think a government will impose a tax on mining, and then simply let the miners flee the country with semi-trucks full of mining equipment and bring that revenue to some other country? I doubt it, instead they will force them to stay in the country. And even if mining is allowed to set up in a different country, the governments of those countries will look to hold the miners under their thumb as well. Miners will have to flee to increasingly lower tier countries, but as you move down the ladder of third world countries, the governments become more and more corrupt, and you can trust them even less than the country you are fleeing from. This is why one of the arguments that miners can simply move to a new country doesn’t hold water and will not work as a long term solution. Centralized mining will not be able fight off the coming government crackdown on crypto currencies. Only truly decentralized networks can.
But as I have said in other posts on this blog, I believe we are entering a time when governments no longer feel they can stand by and watch crypto currencies get any bigger. They either want to bring them fully under government control or they will simply begin outlawing them outright. There will be no middle ground. There will be no “sensible” legislation.
A government simply cannot allow a non-state currency to start to take hold in their country. It is similar to a military invasion as it threatens their sovereignty and their authority. Those are two things governments hold in much higher regard than technological advancement. In fact, they hold those things above all else, even the citizens themselves.
Make no mistake about it. A fight is coming over crypto currencies. Governments will not tolerate them becoming much larger than they already are. Their survival depends on it, and I think we are about to see how far governments will go to ensure their own survival.