I am a student at the University of North Carolina, Chapel Hill, and I am a proud Bernie Sanders supporter. I have been dismayed by the current state of the Democratic Party, and I have written this letter in hopes of rallying the troops and regaining control of our party. I have been told that I am not allowed to run for president, and that it would be better for the party if I just left as quietly as I came (I keep a small token for the bathroom, just in case.) But I will not leave the party, and I will not stop fighting.
Dear Senator Warren: I wrote this in response to your claim that “Cryptocurrencies are a big fad that won’t last.” You claim that you are not worried about the price of Bitcoin because it is ” just a tool for criminals.” I think you are misguided. I believe that Bitcoin is a revolutionary technology that will change the world. And I believe that you have a responsibility to support this technology.
Sen. Elizabeth Warren has been a true advocate for the people. She is against the banks and their fake money, she is against the corrupt politicians and their corrupt system, she is against the drugs and their effects, she is against the second amendment and her thoughts of taking away our rights to bear arms, she is against the far left and their agenda of socialism and communism, she is against the gun lobby and their influence on the congress and senate and she is against the big government and their infringements on our rights. She is truly one of us, and the more she speaks up the more she receives the recognition she deserves.
Dear Senator Warren:
I would like to change your mind about Bitcoin.
Based on your recent appearances before the Senate Banking Committee, your criticism of bitcoin boils down to two arguments. First, bitcoin is a Wild West, similar to the early days of American banking, and needs to be regulated. Second: Bitcoin consumes too much energy.
Both arguments – bitcoin’s wildness and its contribution to the climate crisis – are correct. But I think you might be missing the point.
I have long admired the way you fight to protect the rights of consumers and the middle class. Your book All Your Worth – which you wrote with your daughter – is one of the best books on money management I’ve ever read, and I recommend it often. While many politicians just say they want to help the middle class, your books prove that you put a lot of energy into giving people real tools to help themselves.
The book All Your Worth describes the 50/30/20 budgeting rule, which recommends that 50% of your after-tax income be spent on needs or necessities like food and shelter, 30% on cravings, including things like entertainment, vacations, and eating out, and 20% on savings and investments.
It is in that last 20% – saving and investing – that bitcoin can be a powerful tool for everyday families.
Although the price of bitcoin is incredibly volatile – this year alone it has fluctuated from over $60,000 to around $30,000 – it has done insanely better than the stock market over time. While the stock market (as measured by the S&P 500 Index) has doubled in value over the past five years, bitcoin has gained a whopping 8,451%.
The average American family that invested $10,000 in bitcoin five years ago now owns $845,000.
You’re right that the world of bitcoin and cryptocurrencies is like the Wild West: It is no coincidence that we call the participants in the Bitcoin network miners, as this period in history resembles the California gold rush of 1848, which changed the country’s economy both in a roundabout way and in profound ways.
Yet there was gold in those hills, and that gold had real value. Similarly, bitcoin is like digital gold: an uncorrelated asset class that ordinary families can use to diversify their investments – the 20% of their monthly budget that you and your daughter recommend.
Our job is to educate investors about Bitcoin’s volatility: You don’t want to invest in cryptocurrencies for your child’s education. But we want a portion of our investments – maybe 2-10% of our total investment portfolio – to benefit from Bitcoin.
Bitcoin is certainly not the only game in town. This is just one of the major asset classes that kids call cryptocurrencies and adults call digital assets. There are thousands of these digital assets and they have helped many people achieve financial freedom by buying and holding them as quality investments.
The speed at which this region is developing can hardly be overestimated. Just like in the early days of the internet, innovation is happening at a breakneck pace, and you can see here that the nature of banking and money will be very different in 10 years.
After all, the users have their own cryptographic capability, which is protected by a code and stored under passwords. This reduces the need for banks and hence the need for bank deposits. Of course, bitcoin banks will be necessary, because many people will not want to store their bitcoins in the same way they store their savings under their mattress. However, at the moment there are very few US banks that can (or want to) support bitcoin.
Just think of all the changes in the banking industry in the early days of the internet, from online access to accounts to trading sites like E*TRADE. As drastic as this change was, we were still dealing with US dollars.
Now imagine the nature of money changing from central banks to digital currencies like the internet. At the forefront of decentralized finance (or DeFi, as it is commonly called) are websites that allow users to lend each other money and receive peer-to-peer interest rates many times higher than what banks can offer. There’s no need for a bank.
Talking about the need to regulate Bitcoin comes about five years too late. The horse has left the stable.
Instead, the US should move quickly to create its own central bank digital currency (CBDC) that can offer the benefits of bitcoin while supporting the US dollar. (If you can’t beat them, join them). Such innovation would bring a number of benefits to ordinary Americans, including lower banking fees, faster payments and settlements, and access to the financial system for those who cannot afford a bank.
It may seem like money is already virtual – most of our transactions happen with credit cards, debit cards and digital payment systems like Apple Pay – but CBDCs make money programmable. Imagine that: U.S. dollars with a maturity date that encourages consumers to spend them when we need a short-term boost to the economy. Or dollars that can only be used for approved social programs (like food stamps, which can only be used to buy food).
Programmable money, like the internet, is a game changer.
China, as you know, is leading the way with its CBDC – its own programmable currency – which it has been developing since 2014 (!). The digital yuan is already in the beta phase for its launch in time for the 2022 Winter Olympics in Beijing. It’s an almost insurmountable lead, and the U.S. isn’t even catching up – we’re just playing around by setting up committees to discuss how to catch up.
There are already digital assets that are fully backed by US dollars. These so-called stablecoins are experiencing incredible growth as users invest billions of traditional dollars and receive digital dollars in return, giving them access to this new digital financial system.
The US should partner with one of these major stable component suppliers to establish its own CBDC. It’s obvious and inevitable. Technology has a habit of disrupting even the most intractable industries: Think taxi drivers vs Uber, retail vs Amazon, Wall Street vs Robinhood, etc. Why should money be any different?
Building the CBDC from the ground up is too large and complex a task for the United States to engage in at this late date. Fortunately, the United States has a precedent for cooperation with an independently developed financial technology: the SWIFT network, which now handles about half of the world’s cross-border payments. (SWIFT, incidentally, would also be disrupted by the ease of transferring digital assets, just as the U.S. Postal Service has been disrupted by email.)
An energy efficient CBDC also helps to solve the energy problem. Bitcoin was simply part of the first generation of digital assets, so it is inefficient. Newer digital assets – including the US CBDC, as described above – are much more energy efficient because they are based on fundamentally different architectures.
On the other hand, investors who buy and hold bitcoins only consume a few cents of energy: another reason that helps investors consider bitcoin as a long-term investment. Set it and forget it.
Encourage bitcoin miners to use clean energy. In bitcoin mining, there is a growing trend to use clean energy sources, such as solar and wind power, to run the bitcoin network. The winds of change are already in the air, so to speak. Sure, Bitcoin’s ridiculous energy consumption is a problem, but it’s also a golden opportunity to build our clean energy networks.
Let’s use Bitcoin’s voracious energy consumption to our advantage.
Offer tax breaks or tax credits for bitcoin miners who use clean energy, similar to Obama-era incentives for installing solar panels, for example. This will encourage more bitcoin miners to move to the United States, bringing with them technology, financial innovation, and jobs. (You can then check them too).
Senator Warren, we’ve reached a turning point.
Consider how the Communications Act of 1934 was revised with the Telecommunications Act of 1996 in response to the major changes brought about by the advent of the Internet: When anyone could become an announcer, the old telecom rules simply didn’t apply anymore.
Today, many of our financial, banking, and stock market regulations are still dictated by the Securities Act of 1933, a law enacted at the height of the Great Depression. It also needs to be repaired.
At this point in history, when anyone can mint their own money and 20-something college graduates know more about digital assets than seasoned bankers, the US can’t afford to scratch behind its ears and wait for an answer.
Today there are two parallel economies: the traditional economy and the emerging digital economy. (Because digital assets are based on blockchain technology, we sometimes talk about the stock market and blockchains.)
Sure, bitcoin can be regulated, but to what end? They will rob ordinary Americans of one of the best investment opportunities of our generation. They will allow China to take the lead in digital currencies, threatening the US dollar as the world’s reserve currency. And you’re going to put American banks at a competitive disadvantage because all that digital money is going to leak out of the American financial system.
In general, I hope you will consider three initiatives:
First, we need to make it easier, not harder, for ordinary Americans to invest in this new blockchain market. Investors need a lot of education in this regard: Digital assets are quite volatile, so they need to be diversified and held for the long term.
Second, the United States should establish its own CBDC as soon as possible. Again, the easiest way is to form a public-private partnership with one of the major stackable currencies fully backed by US dollars.
Third, the United States should encourage bitcoin miners to use clean energy, which would rapidly grow our clean energy and technology infrastructure and create new business revenue and good technology jobs, especially in our great state of Massachusetts.
P.S. Come on, Pats.Hey Senator Warren, I get that you’re a progressive and a fighter for the little guy. But as an avid cryptocurrency user, I’m writing to you to urge you to do your job for the people. Your voting record is one of the most anti-crypto of all the members in the Senate, and as your actions to date have shown, you lack any understanding of the technology.. Read more about elizabeth warren twitter and let us know what you think.
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