The emergence of Bitcoin has sparked a schizophrenic response: Investors embrace it, but some governments scorn cryptocurrencies while others seek to ban them.
Bitcoin fell about 4% last month after Turkey’s central bank prohibited the use of crypto in commerce, citing the danger of “irreparable” damage and transactional risk.
“Their use in payments may cause non-recoverable losses for the parties to the transactions, and include elements that may undermine the confidence in methods and instruments used currently in payments,” Turkey’s central bank said when it announced the ban.
The People’s Bank of China, the nation’s central bank, said it plans to “block access to all domestic and foreign cryptocurrency exchanges and (Initial Coin Offerings) websites.”
The actions could end cryptocurrency trading and mining activities in China, but the world’s most populous nation is testing its own digital currency. Some see the digital yuan as China’s challenge to the dollar as the world’s reserve currency.
Inner Mongolia announced plans to “clean up and shut down” cryptocurrency mining operations.
It appears some governments seek to clamp down on Bitcoin because they can’t control it.
But others are moving in the opposite direction, seeking to incorporate crypto into their economies.
Iran, not known as a center of free inquiry and robust debate, recently opened its banking system to crypto payments. However, the decision by the Central Bank of Iran may be an effort to evade U.S. sanctions imposed after the 1979 seizure of the U.S. embassy in Tehran.
Other nations are moving ahead.
In Germany, legislation taking effect July 1 will allow money managers to invest up to 20% of a fund’s holdings in crypto-assets. Bitcoin advocates believe the law will boost Germany’s standing as a financial hub and strengthen the Bitcoin’s stature of a distinct asset class.
In the U.S., FIS Ventures announced plans for a system that allows customers at commercial banks to buy, sell and hold Bitcoin through current accounts. New York Digital Investment Group, a subsidiary of Stone Ridge, said it’s teamed up with Quontic, a New York-based digital bank, to offer a Bitcoin Rewards debit card.
Until now, Bitcoin believers have relied on fintech companies such as Robinhood, payment companies such as PayPal and Square or companies devoted to cryptocurrencies such as Coinbase and Kraken to complete commercial transactions.
If Bitcoin debit cards are successful, the smaller banks may pressure large, nationwide banks to follow suit.
Wall Street has moved into cryptocurrencies faster than commercial banks.
In March, New York investment bank Morgan Stanley said it would offer Bitcoin funds to high net-worth clients. Goldman Sachs soon followed with a similar announcement.
Tesla invested $1.5 billion in Bitcoin and drove the cryptourrency’s price about 20% higher in one day after Elon Musk, founder and CEO of the electric car maker, tweeted about it.
About 25 publicly traded companies have invested a total of $4 billion in Bitcoin, and most have at least doubled their initial outlay, an analyst concluded.
In general, major investors have adopted a buy-and-hold strategy as a bet on future price appreciation. The tactic drives the price higher makes it more difficult for individual investors to buy whole coins. But fractional ownership allows retail investors to get into the market.
However, Bitcoin has harsh critics.
The Financial Conduct Authority (FCA), a British watchdog agency, said investors “should be prepared to lose all their money.” It issued the warning after a sharp downturn, but analysts say corrections are a key element in building a healthy market.
An analyst at JP Morgan Chase said Bitcoin could go as high as $146,000. Others have pegged the figure at $300,000 and Jesse Powell, CEO of Kraken, a crypto exchange platform, believes it could climb as high as $1 million in the next decade.
In the U.S., calls for increased regulation have centered on Bitcoin’s possible use in illegal activity.
Investigators lack full legal authority to pursue the financial transactions of alleged domestic terrorists using Bitcoin or other cryptocurrencies, witnesses told members of the House Financial Services Committee’s Subcommittee in February.
But Chainalysis, a New York-based blockchain analysis company, said illicit activity represented only about 2.1% of all cryptocurrency transaction volume in 2019, or about $21.4 billion.
While some call for tighter regulation of Bitcoin, the U.S. is unlikely to ban cryptocurrencies.
A ban, cryptocurrency backers say, would put the U.S. or any nation at a profound disadvantage future development in both technology and financial services.
The hearty, if belated, embrace of Bitcoin by Wall Street and foreign financial institutions suggests it’s more than a replay of the tulip mania that swept Holland in the early 1600s, the first documented market bubble.
But even with active trading of Bitcoin futures and options, the short answer is: We’ll see.
In mid-day trading Thursday, Bitcoin fetched $57,326.12, off 0.52% in the last 24 hours, but up 96.22% for the year. The all-time high is $64,829.14. The market cap is$1.07 trillion, CoinDesk reported.
The U.S. Labor Department set aside a regulation pushed by the Trump Administration that would have made it easier for employers to categorize part-time workers as independent contractors.
Being classified as an employee rather than as a contractor means the worker is covered by Federal minimum wage and overtime laws as established by the Fair Labor Standards Act of 1938.
The Labor Department’s action won’t immediately change how gig workers are classified, and it’s unclear how the rule will be applied to the digital economy, but suggests the Biden Administration will take a hard look at the issue.
Critics say the decision makes it easier for unions to organize workers, a priority of the Biden Administration. The Trump administration said its rule made it easier for workers to be self-employed and to set their own hours.
Presidents from opposing parties routinely set aside the prior president’s pending rules shortly after taking office.
Last November, California voters adopted Proposition 22 to exempt Uber, Lyft, DoorDash and similar companies after the state legislature passed a law requiring employers to reclassify drivers as employees, making them eligible for certain employment benefits.
The initiative received 58% of the vote.
The gig companies spent about $200 million to back the initiative. Opponents said the wording of the measure confused many voters.
In anticipation of the Labor Department’s action, the Coalition for Workforce Innovation Associated Builders and Contractors of Southeast Texas and Associated Builders and Contractors in March filed suit in U.S. District Court in Beaumont, Texas, challenging the Biden administration’s plan to first delay the new rule and then set aside earlier action by the Trump administration.
Meanwhile, the U.S. job market continued to improve.
Initial jobless claims fell to 498,000 for the week ended May 1, the U.S. Department of Labor reported Thursday.
It’s the first time claims for unemployment benefits fell below 500,000 since the COVID-19 pandemic first pummeled the economy in March 2020, and underscores the on-going economic recovery.