It could be digital gold

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Steven Mnuchin has changed his mind about Bitcoin (BTC) – at least a little. The former US Secretary of the Treasury has previously argued that Bitcoin has no value. But this week, he told CNBC’s Squark Box that it was “no different from buying gold or some other asset.”

“I think the underlying blockchain technology is really amazing and has a lot of different things, especially in fintech and finance,” he said.

While people often talk about blockchain and cryptocurrency in the same breath, blockchain is actually the technology that powers cryptocurrencies like Bitcoin. Blockchain is a secure and sophisticated database technology that can eliminate middlemen from a multitude of daily transactions.

Mnuchin will apparently not fail to buy Bitcoin anytime soon, but at least he’s not opposed to other people investing in the biggest digital currency. “I personally don’t want to have it in my wallet, but if people want it, that’s perfectly fine,” he said.

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Why Bitcoin Could Be Digital Gold

Bitcoin has been dubbed digital gold – a store of digital value – by many prominent investors, including billionaire Mark Cuban.

A store of value is something non-perishable that will not depreciate over time. Gold and other precious metals are popular stores of value. And Bitcoin has several things in common with gold:

  • It is sustainable. It will not deteriorate over time.
  • It’s rare. Only 21 million Bitcoins will ever be produced.
  • The supply is stable. The way Bitcoin is mined means that it would be nearly impossible to suddenly flood the market with coins.

It’s also easy to split a Bitcoin into smaller pieces and move it around. Such characteristics could make it an attractive alternative to gold.

The problem is, it’s still volatile. The price of Bitcoin today is almost half of the all-time high it reached in April. A store of value is not useful if its value may drop significantly or even drop to zero. This is why people remain cautious about calling Bitcoin a viable substitute for gold.

Mnuchin still thinks regulation is essential

He may have relaxed his stance on Bitcoin, but Mnuchin is still concerned about how easily bad players could use digital currencies to launder money. The investment banker has spoken regularly on this issue.

During his tenure as Secretary of the Treasury, Mnuchin promised “very, very strict” regulations, including proposals to crack down on anonymous wallets and increased know-your-customer requirements. In this week’s interview, he reiterated the need for Bitcoin to have “full BSA and regulatory compliance”. BSA stands for Bank Secrecy Act, introduced in the 1970s to combat money laundering. The BSA requires U.S. cryptocurrency exchanges to register as a money service business and meet certain requirements.

The regulation of crypto is a hot topic around the world as authorities determine how to control this sprawling industry. For example, the United States is considering a digital dollar and is looking for ways to strengthen regulation.

Powell: Crypto Does Not Have Appropriate Regulations Yet

When Federal Reserve Chairman Jerome Powell testified before the United States House of Representatives Committee on Financial Services this week, he stressed the need for “an appropriate regulatory framework, which we do not have. frankly not ”.

One of the challenges is that there are many different companies that come under the cryptocurrency umbrella. These range from decentralized lending platforms to programmable blockchains. Some act more like currencies and some act more like securities, but currently they are all regulated like commodities.

The authorities want to protect retail investors from scams and high-risk investments without stifling this developing industry.


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