Congressman: ‘Prohibit US Persons From Buying Or Mining Cryptocurrencies’; Crypto World Erupts
In his opening remarks at the Subcommittee on Monetary Policy and Trade (Committee on Financial Services) Hearing: ‘The Future of Money: Digital Currency’ on July 18, 2018, Congressman Brad Sherman (D-CA) called for the prohibition of both buying and mining cryptocurrencies (crypto) for all US citizens.
With this statement, he turned over the cryptocurrency rock, and true to form, the denizens underneath predictably scurried about, spouting tired, fallacious counterarguments on social media and in the crypto press.
Sherman’s argument calling for the ban of crypto in the US contrasted crypto and the US dollar. “The role of the US dollar in an international financial system is a critical component of US power,” Sherman said. “It brought Iran to the negotiating table.”
Regardless of one’s opinion on the deal the US and its allies made with Iran, “we would have nothing had it not been for the role of the dollar,” Sherman added.
The power of the US dollar overseas depends in large part upon its seigniorage – the difference between the face value of currency and the cost of printing it. “There is seigniorage, the money that we make as a country because we’re the reserve currency, because we can issue a greenback that does not yield interest,” Sherman explained. “There are people who are alive today because of the profits the US government makes on that, whether it be to fund defense or medical research, all of that gets diminished with cryptocurrency.”
Emphasizing Crypto’s Role in Crime
While Sherman’s comments about crypto vs. the US dollar speak to his position as a representative of the Federal Government, his statements about crypto’s role in crime apply globally. “As a medium of exchange, cryptocurrency accomplishes nothing except facilitating narcotics trafficking, terrorism, and tax evasion,” Sherman pointed out.
Perhaps because of the time limit for his remarks, Sherman didn’t mention other, equally insidious criminal roles for cryptocurrency – cryptojacking, electricity theft, and mining by organized crime syndicates. He did reference how electricity for mining “takes away from other needs and/or adds to the carbon footprint,” however.
Perhaps his strongest argument for banning crypto attacks the philosophy at the heart of the crypto movement. “Some of its supporters delight in that [facilitation of criminal enterprise] – that if you can disempower the US government from being able to prevent terrorism, narcotics trafficking, and tax evasion, you have somehow struck a blow for liberty,” he said. “That is reason enough to ban it.”
The Predictable Reaction
Within minutes of Sherman’s remarks, the crypto community erupted in consternation, trotting out the tired, fallacious arguments I’ve pointed out before.
Many such ‘arguments’ were simply ad hominem attacks against Sherman himself – the weakest possible attempt at counterargument available to someone with no valid argument to present. “Your comments and questions asked at yesterday’s committee hearing about bitcoin and crypto were surprising ill-informed and laughable,” tweeted @sublimechain.
The ad hominem tweets kept coming. “You showed extreme ignorance of both the world economy and the technology behind crypto,” tweeted @MichelleLStaton.
Or this: “You obviously know too little about it to make competent statements and you obviously need some history lessons,” from @theBrainium.
Also quite popular: the false equivalence fallacy, a favorite among the crypto cognoscenti. “Should we ban USD? Drug dealer, corruptor and many kind criminals use it,” tweeted @dvoriano, fallaciously arguing that criminal enterprise with crypto is justified because criminals sometimes use dollars as well.
The Best Counterargument: A Smear Campaign?
Faced with a credible threat to their flawed worldview and no rational counterarguments to present, many crypto fans resorted to angry attempts to smear Congressman Sherman’s name.
As smear campaigns go, however, the one they came up with was tenuous at best.
This argument goes as follows: first, one of Sherman’s campaign donors is Allied Wallet, an ecommerce payment processing service. This statement is true, according to OpenSecrets.org, which reports that Allied Wallet donated $12,500 to Brad Sherman’s 2018 campaign, one of 14 campaign donations Allied Wallet has made to various members of Congress so far this year.
Second, because Allied Wallet handles fiat currency transactions, it is opposed to crypto. This statement doesn’t hold water, as it’s possible to conduct Bitcoin transactions through Allied Wallet via the Apiant API. As far as Allied Wallet is concerned, cryptocurrencies are just another type of currency it may accept, once regulatory compliance hurdles are resolved.
Third, the US Department of Justice recovered over $13 million from Allied Wallet in 2010 as part of its crackdown on online gambling sites that year. According to K&L Gates, this statement is true as far as it goes – but the party at fault was gambling site Pokerstars, who reached an agreement with the DOJ to keep its site open for US-based players to request refunds.
The crypto community, however, has been misconstruing the 2010 action. “Cryptocurrency supporters, for the second time, pointed out that Sherman’s biggest campaign contributor is Allied Wallet, an online payments service that entered into a settlement agreement costing them over $13 million USD in relation to an FBI money laundering investigation in 2010,” wrote Todd Byrne for BitsOnline.
The reference to ‘money laundering,’ however, is disingenuous, as the investigation was into online gambling – and in any case, the events in 2010 have no bearing on Sherman’s motivations for calling for a prohibition on crypto.
This smear campaign, such as it is, rests on shaky ground. Allied Wallet presents itself as fully compliant with all relevant laws and regulations, has no reason to feel crypto threatens its business, and in any case, a $12,500 donation is unlikely to sway a Congressman’s opinion on an issue he feels so strongly about anyway.
Smearing Sherman’s good name, however, is the best argument the community has for why crypto should remain legal, while Sherman’s arguments for prohibition are clear and well-reasoned. Which arguments do you believe?
Intellyx publishes the Agile Digital Transformation Roadmap poster, advises companies on their digital transformation initiatives, and helps vendors communicate their agility stories. As of the time of writing, none of the organizations mentioned in this article are Intellyx customers. The author does not own, nor does he intend to own, any cryptocurrency or other cryptotokens, or any interest in any ICOs. Image credit: US Congress.
By: Jason Bloomberg
July 21, 2018