Local expert discusses US wants to legalize crypto businesses

SPRINGFIELD, Mass. (WWLP) – Crypto companies are on the verge of being pushed out of the United States unless other tactics are adopted. 22News spoke with AIC economics professor John Rogers about how the U.S. is in a bind over potential threats to debank digital asset companies.

At the moment, Rogers sees the biggest problem as the way banking currencies are designed. According to Rogers, Bitcoin was created 10 to 12 years ago to get around the banking system using something known as a blockchain, also referred to as a distributed ledger. This means that instead of all transactions being processed by a central clearinghouse, your credit card is processed by a bank such as City Bank or JP Morgan and is cleared here, so no one knows about them. It is impossible to get back into the wallet after the transaction is over.

Now, says Roger, the banking system works differently, in a central way, so that the government and central authorities. These financial transactions are closely monitored by central banks and the Federal Reserve. For many reasons, people have invested heavily in these currencies. “For example, almost everyone uses PayPal which is a blockchain mechanism to make payments, so you don’t have to use your credit card and go directly into PayPal. So they’re out there, Rogers explains. “I think the problem with the banking system and the Federal Reserve, which is responsible for the banking system, has been finding it difficult to control this or even monitor it.”

This is what happened with these bank failures in Silicon Valley and Signature Bank. They had built up investments in these digital currencies that couldn’t really be monitored, and these currencies are volatile. The price of Bitcoin, which is the most important or widely used cryptocurrency, has jumped all over the place.

As a result, many people have been burned by speculation. When it goes from $30,000 to $10,000, then up to $20,000. “People make money and lose money, and it was Blankfein Fried’s that was arrested and responsible for this,” Rogers explained. “People said why didn’t people know about this or why wasn’t it regulated, but it couldn’t be regulated”

Thus, banks face this problem and cryptocurrencies played a key role in the recent banking crisis. Rogers believes that’s what people are worried about, and some banks have stated that they don’t want to handle these digital currencies.

But many believe it may be the wave of the future, so the banking system will not be able to adapt to it. It is unclear what will be the future of the banking system, but Roger predicts that it may only have digital wallets and use PayPal-like processing, and we may not even need banks, so it is a significant turning point in the financial sector.

“I think cryptocurrency is going to play a role for a lot of reasons primarily their more convenient, less expensive, a lot more privacy, which a lot of people are looking for, but I also think they have a lot of dangers, their a lot harder to regulate and be used for the original Bitcoin and actually developed for the Silk Road,” he said. “I think in the long run people are a little worried about the role of the US dollar because the US dollar is now the reserve currency around the world.”

Rogers adds for the US economy, our strongest point is that we have a currency that is the most respected, which gives us a lot of weight in the global financial markets, which could be threatened by this in the long term, but Rogers sees that nothing will happen in the short term. If anything In the long term, there may be a trend that begins to weaken the reserve power of the US dollar.

“Well, if we say we just don’t like these cryptocurrencies, we’re not going to let people handle them and forget to tell the banks not to accept them as collateral or deposits.”

There is no doubt that the United States is considered a hub for financial innovation, our greatest strength. When people say we have nothing to do with it, the efficiency of the American financial system is reduced, Rogers noted.

“People need to realize that they’re dealing with currencies that don’t have the same value, and that these markets are prone to volatility,” he says. “It is risky for banks to use these cryptocurrencies until now.”

The corruption refers to the platform that Sam Bankman-Fried and other Ponzi schemes use to encrypt crypto until they are caught.

“These are volatile policies, and if you’re a bank like silicon valley bank and if you have some of these parts of your asset class, they might not be what you thought they were worth. As you’re under pressure to back up debtors or take money out of the bank, you have to claim that we are solid here, we are if that is the case.”

Additionally, these currencies are highly volatile and therefore, if you are a bank like Silicon Bank, you may not find this asset class as valuable as you thought it was, as you will be under pressure to back up those depositors who withdraw money from the bank and don’t run out of time. Confirm that we are solid in this regard.

“Quite simply the nature of things, it’s a currency and it’s unstable and they’re many types of cryptocurrencies, so it depends on which one they’re talking about and the inherent stability of them,” Rogers expressed. “I would distinguish between actual fraud and corruption and simply the fact that you’re dealing with a new financial product that’s inherently unstable because of the way it’s put together and hasn’t matured yet and there’s a lot of different currencies and they compete with each other and they have different logic for them if Bitcoin is one of the main currencies with high volatility.”

According to Rogers, there are others, such as stablecoins, that are trying to get themselves back up, but they haven’t matured yet, and their logic is different from the others. The crypto industry has yet to see a comprehensive framework or regulation developed by the United States.