Peter Schiff isn’t just my partner at Schiff Sovereign– we’ve been close friends for many years. And we generally see eye-to-eye on most things going on in the world.
But one area where we disagree is crypto. Not to put words in his mouth, but Peter is pretty vocal in his criticism of Bitcoin; he says it’s “useless” and a “total scam” and predicts it will go to zero.
I disagree. There are a number of important use cases for crypto– whether as a speculative asset for capital gain, a store of value, a digital currency for online transactions, a private means to hold wealth, a way to disconnect from the banking system, etc.
This isn’t a “scam”. Rather, it’s useful, functional technology… which is why I recommended it to my audience as far back as March 2013.
Obviously crypto has deep flaws and areas to improve. And just like in any frontier boom, plenty of thieves and lunatics have emerged. But to judge crypto based on the misdeeds of Sam Bankman-Fried is like condemning the stock market because of Bernie Madoff.
All that said, there are still plenty of things that I’m skeptical about.
For example, I think there’s a bizarre disconnect between Bitcoin’s market cap and its actual value; I recognize that Bitcoin is the original cryptocurrency, and there’s some ‘brand value’ associated with that.
But as the oldest cryptocurrency, it’s also the most technologically obsolete… therefore it should not be the most valuable; no other sector places the highest value on the most obsolete technology. Only crypto. And that’s a bit odd.
There are plenty of other oddities; for example, it’s strange that the company Strategy (formerly Microstrategy) has an enterprise value of $112 billion, even though its only asset is $61 billion worth of Bitcoin.
In other words, the company is worth nearly twice as much as the Bitcoin that it owns; this is bizarre and doesn’t make any sense.
I’m also extremely skeptical of the US government’s involvement in crypto; the pre-election promises of starting a Sovereign Wealth Fund to own Bitcoin struck me as completely ludicrous.
I mean… think about it: one of the things that would drive up the price of Bitcoin is excessive government spending. So rather than cut spending, the government wants to own an asset that will benefit from their own financial irresponsibility. It’s back asswards in my humble opinion.
Naturally I was also skeptical when I heard about the GENIUS Act (Senate bill 394) to regulate crypto.
Then I read the legislation. And I concluded that the GENIUS Act might actually be pretty genius.
GENIUS stands for “Guiding and Establishing National Innovation for US Stablecoins”. Something tells me ChatGPT came up with that.
And the basic idea is for state and federal regulators to authorize “Permitted Stablecoin Issuers” who could… well, do just that– issue stablecoins.
States can issue their own licenses and permits to stablecoin businesses. But once a particular coin passes a $10 billion market cap, it must be regulated by the Feds.
Here’s the smart part: in the definition of stablecoins, they include anything that owns short-term Treasury bills. So, through this legislation, they are creating an entirely new class of investors who would purchase US government debt.
This is pretty important, because the Treasury Department is in sore need of new lenders.
Foreign investors are fleeing the Treasury market; after decades of being considered the world’s “risk-free asset”, foreign governments and central banks are aggressively reducing their dollar holdings.
This is THE primary reason why the gold price has come so high: foreign governments and central banks have been cashing in their Treasury bonds, then trading that US dollar cash for gold.
Given that the “One, Big, Beautiful Bill” calls for another $2 trillion deficit this fiscal year, Treasury is going to need all the lenders it can get.
Remember that stablecoins (especially under this legislation) are basically just money market funds in disguise; they pool capital and buy government bonds.
So, this GENIUS Act is essentially a way of tapping crypto wealth and diverting that capital into Treasury securities.
It’s a clever idea. But frankly it would be a lot better if the government simply cut spending rather than come up with innovative ways to finance the deficit.
