THE END OF FREE CRYPTO MARKETS – THE WILD WEST IS OVER
Over the last few months, BOOM has warned readers that US regulators will focus more of their energy and attention on the world of Crypto. Recent events give stark evidence that BOOM was right.
Janet Yellen, the Secretary of the US Treasury, and Gary Gensler, the head of the Securities and Exchange Commission have revealed their intentions. Their patience has expired. The FTX collapse in November and the failure of Silicon Valley Bank and Signature Bank have exposed the risk of contagion. Thus, the Crypto world is now seen as a definitive threat to the US financial system. The gloves are off. Let’s look at what Yellen and Gensler are doing.
JANET YELLEN ON INCREASED SURVEILLANCE
Last week, on March 30th, Janet Yellen, the US Secretary of the Treasury made a speech on Financial System Stability at the National Association for Business Economics. It was a lengthy one designed to obfuscate the true issue at hand – the announcement of increased regulation of the Crypto Stablecoin market.
She started the speech by stating that she had seen many financial crises in her 30 year career. This was followed by a plea for stability in the financial sector, stating that stability brings many benefits. All well and good. Nobody would argue with the goal of stability in the financial sector.
She then made this statement “Today’s financial system is characterized by increased complexity and interconnection across market actors and geographic boundaries. A single point of failure can cascade through the system like a wildfire – leading to a failure of the financial system to perform its core functions.”
What could possibly be this “single point of failure”? Why had she used such language?
She went on to describe the theoretical threat of a debt deflation crisis – where asset prices fall and trigger sales. “The resulting price declines trigger further forced sales. At each stage, the net worth of leveraged investors falls, requiring additional liquidations. “ And then she referred to the recent bank runs on SVB Bank and Signature Bank as examples of unexpected bank crises.
Having said all that she stated “the US banking system remains the strongest and safest in the world”. So if that is the case, what the hell really happened at SVB Bank and Signature Bank? She pointedly did not tell us. As BOOM has pointed out over the last few weeks, these banks had to be rescued by the Federal authorities because a big depositor demanded it. And because a Stablecoin failure had been revealed as a potential disastrous outcome.
So, inevitably, Yellen then discussed Stablecoin risks and revealed the true purpose of her speech.
“We have recommended that Congress enact legislation to establish a comprehensive prudential regulatory framework for stablecoin issuers. Such a framework would include consolidated federal supervision, requirements for how a coin could be backed, capital and liquidity requirements, and restrictions on affiliation with commercial companies.”
GENSLER SEEKS $2.4 BILLION — US REGULATORS GET SERIOUS
It is clear that US regulators have been rattled by recent weaknesses in the Stablecoin market (in particular in Circle’s USDC) and failures in SVB bank and Signature Banks both of which are relatively small domestic banks but with strong connections to the world of Crypto. They are worried about a possible contagion where some future instability in the Crypto world could infect the real world financial system and cause serious damage. This is called Contagion Risk.
BOOM has frequently warned readers to expect increased financial regulation in the Crypto world. Why? Because the Crypto world has been a crime scene for a very long time. It is a world with no borders, a Badlands, where nefarious characters can roam free. Most innocent citizens have no idea of the potential risks they are taking when they wander into such an environment. This is a pity because the Crypto world has potential for financial innovation. For example, BOOM feels that Non Fungible Tokens (NFTs) are extremely interesting as an asset class and could have future unimagined utility. However, the bulk of the Crypto world comes burdened with the lies that have been told repeatedly over the last 14 years.
For example, the use of the word “currency” in the term Cryptocurrency has always been misleading. BOOM is adamant that the so-called “cryptocurrencies” can never be currencies. They do not erupt from overwhelming societal demand, they do not solve a pressing transactional problem and they are still not generally accepted in the settlement of everyday transactions or capital settlements despite 14 years of promises.
The world of Crypto was launched way back in January 2009 on false premises, false narratives and fraudulent promises. Most of those fraudulent misrepresentations were boosted by the Gold Rush mentality – “you can get rich fast”. The best lies always contain some truths, otherwise they would be too obviously false. Some people did get rich fast but most of that happened in a relatively short time period of 12 months from November 2020 to November 2021.
During that period, it was a wild ride, a 10 bagger for those few super gamblers who managed to get set with big bets during early 2020 and also managed to sell out at the top in late 2021. Crypto is not a Zero Sum game. Big winners were able to take advantage for some considerable time as prices (as quoted in US Dollars) rapidly accelerated. The clock stopped, however, in November 2021 when the total market capitalization of the entire Crypto world reached almost US$ 3 Trillion. Since then, it has been a relentless ride down in price.
However, let’s get back to the US regulators whose attention has now become more focused on the crime scene. Believe it or not, Gary Gensler, head of the US SEC (Securities and Exchange Commission) last week asked for an extra $ 2.4 Billion in government funding to strengthen his organization. It was all about “protecting the public” from the world of Crypto.
At a budget meeting of the House Appropriations Committee, Gensler made this statement. “Rapid technological innovation in the financial markets has led to misconduct in emerging and new areas, not least in the crypto space”. And “addressing this requires new tools, expertise, and resources”. “The increased budget would allow the SEC to hire 170 additional staff.” That amounts to $ 14 Million per new staff member when a total of $ 28 Million would easily cover the cost of employing the 170 extra staff. Clearly, SEC staff will not be paid $ 2.4 Billion. Gensler said that this amount of funding ($ 2.4 Billion) would be used to help limit “misconduct” in the Crypto industry. So what does this mean? The sum seems huge.
BOOM strongly suspects that the SEC plans to use these funds to become a more significant player in the Crypto markets in order to smooth panics and prevent any adverse event being transmitted through the Stablecoin market to the real financial world of banking. To achieve this, they will have to limit any surges (or collapses) in price.
Gensler restated his previous stance that most cryptocurrencies are securities and he said that offshore entities that sell to US investors must come under their securities law. “If you’re touching US investors, selling tokens to US investors, then you come under either US securities laws or CFTC regulations” he said.
He also said that, in 2022, the SEC launched more than 750 enforcement actions that “resulted in orders for $6.4 billion in penalties”. 30 of those actions directly related to the world of Crypto.
THE CONSEQUENCES
The consequences of such a move are very significant for the Crypto markets. Speculators and investors playing in those markets will now have to contend with the involvement of a very big whale with a $ 2 Billion war chest. And that whale will not be interested in seeing Crypto prices rise, quite the opposite.
Then there is the risk of increased regulation and enforcement for the operators of the various Crypto markets. The CFTC recently launched a lawsuit which alleges that the large Crypto exchange, Binance, had violated US derivatives laws by offering its derivative trading services to US customers without registering with the right market regulators. It said that Binance had prioritised commercial success over regulatory compliance. The regulatory body also levied charges against Binance’s founder and Chief Executive Officer, Changpeng Zhao and former Chief Compliance Officer Samuel Lim. They were charged with taking steps to violate US laws, including directing US-based “VIP customers” to open Binance accounts under the name of shell companies.
BINANCE DERIVATIVES LICENSE CANCELLED IN AUSTRALIA
On Thursday April 6th, the Australian regulator, ASIC, the Australian Securities and Investment Commission, cancelled Binance’s Derivatives License acting upon a request from Binance itself.
The Press Release from ASIC made the following statements —
ASIC has repeatedly warned potential crypto users that crypto is risky and complex. Crypto derivatives pose additional risks to consumers through the operation of leverage.
Binance group entities have been the subject of regulatory warnings and action from a number of overseas regulators. In addition to the (US) CFTC, these include:
• UK Financial Conduct Authority
• Japan Financial Services Agency
• Italy Commissione Nazionale per le Societa e la Borsa (CONSOB)
• Monetary Authority of Singapore
• Netherlands Central Bank (DNB)
• Ontario Securities Commission
• Thailand Securities Exchange Commission
ASIC continues to take action to disrupt and deter harm and misconduct within its jurisdiction.
• On 15 December 2022, ASIC commenced civil penalty proceedings in the Federal Court against Finder Wallet Pty Ltd for alleged unlicenced conduct and inadequate risk disclosure in relation to the Finder Earn product
• On 23 November 2022, ASIC commenced civil penalty proceedings in the Federal Court against Block Earner for unlicensed conduct in relation to its crypto-asset based products.
• On 25 October 2022, ASIC commenced civil penalty proceedings in the Federal Court against BPS Financial for alleged misleading statements and unlicenced conduct in relation to the crypto-asset “Qoin”.
PFIZER DEATHS AND INJURIES REPORTED
A table of Deaths and Injuries was recently brought to BOOM’s attention. It was published on Page 7 of this report by Pfizer regarding their new Covid Vaccine – BNT162b2 — 5.3.6 Cumulative Analysis of Post-authorization Adverse Event Reports Received Through 28-Feb-2021
The document “provides an integrated analysis of the cumulative post-authorization safety data, including U.S. and foreign post-authorization adverse event reports received through 28 February 2021”
Table 1 in the document outlines the adverse event data received by Pfizer between December 1st 2020 and 28th February 2021, a period of just 3 months during which they had shipped 126 Million doses. There were 42,086 “case reports” of injury and death. It is not clear how many doses had actually been injected by the time of the report. However, it seems logical to assume that in such a short time frame it was not anywhere near 126 million.
The injuries were overwhelmingly reported by women – 29,914 versus 9,182 (for men) and included 1,223 deaths. The largest age group affected was the 31 – 50 year age group.
The following statements made under the Methodology section reveal that the number of reported cases was much more than Pfizer was expecting in such a short time frame and that they had to rapidly increase their staff numbers to cope with the case reports.
“Due to the large numbers of spontaneous adverse event reports received for the product, the MAH has prioritised the processing of serious cases, in order to meet expedited regulatory reporting timelines and ensure these reports are available for signal detection and evaluation activity.
Pfizer has also taken a multiple actions to help alleviate the large increase of adverse event reports. This includes significant technology enhancements, and process and workflow solutions, as well as increasing the number of data entry and case processing colleagues. To date, Pfizer has on boarded approximately 600 additional full-time employees (FTEs). More are joining each month with an expected total of more than 1,800 additional resources by the end of June 2021.”
Among the specific safety concerns listed by Pfizer were –
Anaphyllaxis, Vaccine-Associated Enhanced Disease (VAED), Including Vaccine-associated Enhanced Respiratory Disease (VAERD), Use in Pregnancy and lactation, Use in Paediatric Individuals <12 Years of Age
The Report is publicly available at — https://phmpt.org/wp-content/uploads/2022/04/reissue_5.3.6-postmarketing-experience.pdf
Appendix 1 on Page 30 lists the Adverse Events Reported of Special Interest. The list is 8 pages long and is worthy of special attention by BOOM readers.
QB Explained
and BOOM’s Perfect Economy
In economics, things work until they don’t. Until next week, make your own conclusions, do your own research. BOOM does not offer investment advice.
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HOW MOST MONEY IS CREATED
BANKS CREATE FRESH NEW MONEY OUT OF THIN AIR
(but they always need a Borrower to do so)
THERE IS NO SUCH THING AS A DEPOSIT
BANKS PURCHASE SECURITIES, THEY DON’T MAKE LOANS
BANKS DON’T TAKE DEPOSITS, THEY BORROW YOUR MONEY
Watch this short 15 minutes video and learn as Professor Richard Werner brilliantly explains how the banking system and financial sector really work.
How is Most New Money Created ?
LOANS CREATE DEPOSITS — that is how almost all new money is created in the economy (by commercial banks making loans).
From the Bank of England Quarterly Bulletin Q1 2014 —
“Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.““Most money in the modern economy is in the form of bank deposits, which are created by commercial banks themselves”.
YouTube Video — https://www.bankofengland.co.u/quarterly-bulletin/2014/q1/money-in-the-modern-economy-an-introduction
and https://www.youtube.com/watch?v=ziTE32hiWdk
Paper: Money in the Modern Economy — CLICK HERE
Most economists are unaware of this and even ignore the banking & finance sectors in their econometric models.
On 25th April 2017, the central bank of Germany, the Bundesbank, released a statement on this matter —
“In terms of volume, the majority of the money supply is made up of book money, which is created through transactions between banks and domestic customers. Sight deposits are an example of book money: sight deposits are created when a bank settles transactions with a customer, ie it grants a credit, say, or purchases an asset and credits the corresponding amount to the customer’s bank account in return. This means that banks can create book money just by making an accounting entry: according to the Bundesbank’s economists, “this refutes a popular misconception that banks act simply as intermediaries at the time of lending – i.e. that banks can only grant credit using funds placed with them previously as deposits by other customers”. By the same token, excess central bank reserves are not a necessary precondition for a bank to grant credit (and thus create money).”
Reference: https://www.bundesbank.de/en/tasks/topics/how-money-is-created-667392
The Reserve Bank of Australia (Australia’s central bank) has also contributed to the issue in a speech by Christopher Kent, the Assistant Governor on September 19th 2018.“…… the vast bulk of broad money consists of bank deposits”“Money can be created …….. when financial intermediaries make loans““In the first instance, the process of money creation requires a willing borrower.”“It’s also worth emphasizing that the process of money creation is not the result of the actions of any single bank – rather, the banking system as a whole acts to create money.”
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