By Ann C. Logue
Cryptocurrency has been on the market for 13 years, but no one has really figured out what do with it. When money market funds were introduced to the public in the 1970s, it took people no time at all to figure out that they could use them in place of bank savings accounts. The return was higher, and the risk was so small as to be practically zero.
Of course, practically zero is not actually zero. One of the many financial crisis catastrophes was that some money market funds “broke the buck”. The loss of principal was small; the loss of confidence in the once-popular product continues. This week, TerraUSD broke the buck. TerraUSD is a cryptocurrency that is designed to have the same value as the US dollar. The idea is that it would allow people to hold cryptocurrency free from price gyrations and make purchases denominated in US dollars. No matter that the Federal Reserve Bank researched an electronic currency in 1996; people bought TerraUSD because it was supposed to maintain a value of $1.00. The coin is worth $0.14 as I write this.
Crypto prices across the board are down this week. It’s only a coincidence that last week, the SEC announced several crypto-related actions including doubling the size of its crypto enforcement team, fined NVIDIA $5.5 million for failing to disclose the effect of crypto mining on its business, and charged two people with running a fraudulent cryptocurrency mining scheme.
The SEC actions aren’t directly related to the prices of crypto, but the ongoing collapse in prices will almost certainly expose more fraud. A rising tide makes sinking boats look like they are floating. People who have been burned will file complaints that will uncover even more problems. And none of this will solve the basic problem with cryptocurrency: what do you do with it?
And if there are uses for it, why couldn’t the Federal Reserve Bank, European Central Bank, or Bank of Japan issue their own cryptocurrency?
Leave a Reply