When is equity, not equity?
Alexis Ventouras, Director of CITIC Securities International, Luxembourg, raises a good point; is the equity that has been suggested by Binance, as providing the stability of the Cryptocurrency industry, actually a stable form of equity?
The difference between equity and illiquidty?
Early on in Cryptocurrency we had MLM GLOBAL and ONECOIN, which were not convertible to FIAT cash. By definition, a cryptographic coin that can not be converted to FIAT is called a VIRTUAL COIN or LOYALTY TOKEN. A virtual coin holds value only within a finite customer ecosystem, it cannot be liquidated and converted to real world value, but is rather exchanged for discounts.
It's a fancy coupon.
Convertibility is one of the defining factors that determines whether a coin is actually a cryptocurrency, or whether it is just a virtual coin that is a loyalty token. Virtual coins are by definition, unconvertible to real world finance. VALIDATION Once a virtual coin is listed on a cryptocurrency exchange, it becomes a convertible cryptocurrency. Binance owns the exchange and the coin, and so, CZ thinks his coin is safe. He has the power to decide which coins can be exchanged for FIAT. The wildcard is regulation.
Binance has a monopoly and could become a victim of its own success. By law, monopolies can't continue in democratic markets. USA typically breaks up monopolistic ventures (Microsoft Anti Trust Law Suit). China has also recently demonstrated that it won't allow monopolistic organisations either, coming down hard of Jack Ma (Alibaba).
In reality, Binance is in a tenuous position right now,
staking Binance (and cryptocurrency industry) fortunes on a virtual coin that it has approved itself as a legitimate token of currency. Inferring that CZ is the ultimate authority.
If another authority disagrees with that position, then convertibility is at risk, along with its equity.
What is the likelihood of regulatory impact?
The FTX debacle solidifies the case that private industry should not replace federal currency management, due to the impacts of cavalier entrepreneurs on the overall economy.
The trouble for CZ is that, to many officials; he has fed into the instability and has privately, commercially benefited from it. CZ is the ultimate beneficiary of the conflict. Where this potentially leads is to a federal claim of authority, challenging the authenticity of the role of private exchanges to control national and global currency.
You really think that governments are going to allow private individuals to broker so much control over their economies?
Against the legislators is the fact they have declared cryptocurrency an asset, and not a currency. Conversely, this also works in the favour of those who want to diminish the role of privitised cryptocurrency and replace it with Central Bank Digital Currencies (CBDC) under Federal jurisdiction and government regulatory control. Once the government CBDCs are established, it is easy for a government to use legislation to shift the Cryptocurrency convertibility mechanism from the private to the federal domain.
They have to do this anyway, because the FIAT system is technically bankrupt.
By 2025 to 2030, we will have a ratio of one working person paying two pensions. This is due to the coming tsunami of our global ageing populations. We can't afford pensions.
For two successive generations, that number increases, then it dies off altogether, literally. As Elon Musk has accurately predicted, we then have a low population crisis, due to declining birth rates. This will hit us globally well before the year 2080, by which time the world population will be very significantly lower. Other factors come in, like migration due to climate impact, food and water crisis and conflicts over resources.
GOOD AS GOLD There have been no trustworthy audits of the tU.S. Federal Gold Reservers since the 1950's. Russia, *China and the BRICS member nations are already making the shift away from cross border settlements in USD, with subsequent settlements poised to occur in CBDC RMB/CNY/YUAN. The gate is open and the horse has bolted on the advent of CBDC and China is far in the lead.
CROSS BORDER SETTLEMENT USA FED-COIN has been on the table for years, the advent of CBDC will lead to U.S. Government controlled cryptocurrency.
Regulatory and compliance costs are an easy way to get rid of the competition in Alt Coins. Easier than people think.
However, *YUAN is going to be at least to some extent, GOLD BACKED, inspiring confidence and trust in cross border settlement. This may invoke USA to audit and then prove GOLD RESERVES, or stick with the FIAT DEBT NARRATIVE, which can and will lead to hyper inflation. Which is the main problem with China and BRICS. This is much like a Texas Holdem Poker Game. If someone calls and raises a wager against your hand, either you raise the stakes or you forfeit your hand. China, Russia and BRICS are forcing USD to show.
You can't print more currency, without devaluation.
GET OUT OF (DEBT) JAIL FREE CARD A capital raise through a federal government centralised DAO (yes I know, contradiction of terms), could go a long way towards having a get out of jail free card in the game of monopoly.
If USA genuinely has more GOLD than RUSSIA and CHINA, then USD CBDC could more easily dominate cross border settlements.
SUMMARY Anyway you look at convertibility, the incentive is there for governments to legislate exchange convertibility out of existence at any given moment. CZ does not hold that power as his wildcard. Thus there is a significant risk factor to be taken into consideration. GLYN MACLEAN