The U.S. Federal Reserve and president Donald Trump are fearful of challengers to the almighty dollar.
Bitcoin, a new form of digital money called cryptocurrency that is scarce and exists independently of government, heralded a wave of technological rivals to the dollar—with Facebook creating libra and China digitalizing its yuan.
This week, the U.S. financial regulator shut down messaging app Telegram’s decentralized crypto project—igniting fears the U.S. could again try to destroy bitcoin if it becomes a threat to the dollar’s shaky supremacy.
Following a long-running battle with the U.S. Securities and Exchange Commission (SEC), Telegram walked away from its blockchain-based Telegram Open Network (TON) and its native cryptocurrency, gram.
“Unfortunately, a U.S. court stopped TON from happening,” Telegram’s founder and chief executive Pavel Durov revealed this week, drawing a line under the embattled two-and-a-half year project.
Back in 2018, Telegram, now based in Dubai and boasting 400 million monthly active users, raised a staggering $1.7 billion from almost 200 private investors to fund development of the TON network and gram token.
The SEC blocked Telegram’s much-hyped public fundraiser just two months later. In October last year, the SEC ordered Telegram to halt the sale of gram tokens, finding it in violation of the Securities Act.
This week, the SEC hammered home the final nail in the TON coffin.
“The U.S. court declared that grams couldn’t be distributed not only in the United States, but globally,” Durov wrote.
“Why? Because, it said, a U.S. citizen might find some way of accessing the TON platform after it launched. So, to prevent this, grams shouldn’t be allowed to be distributed anywhere in the world—even if every other country on the planet seemed to be perfectly fine with TON.”
Durov argued the SEC decision “implies other countries don’t have the sovereignty to decide” what’s good or bad for their own citizens.
“We, the people outside the U.S., can vote for our presidents and elect our parliaments, but we are still dependent on the United States when it comes to finance and technology. The U.S. can use its control over the dollar and the global financial system to shut down any bank or bank account in the world,” Durov wrote, adding the U.S. can also force American iPhone-maker Apple and Android developer Google to ban apps.
“Unfortunately, we—the 96% of the world’s population living elsewhere—are dependent on decision makers elected by the 4% living in the U.S.”
The decision maker in question, U.S. president Donald Trump, has made it clear competitors to the dollar are not welcome.
“We have only one real currency in the U.S.A. and it is stronger than ever, both dependable and reliable,” Trump said last year in an outburst against Facebook’s libra, bitcoin and cryptocurrencies. “It is by far the most dominant currency anywhere in the world, and it will always stay that way. It is called the United States dollar!”
Trump’s tirade was sparked by news Facebook, now counting one third of the world’s population among its monthly users, was developing a “global currency” based on bitcoin’s blockchain technology.
Facebook’s crypto project has, however, been severely hobbled by regulators. A digital wallet supporting major currencies is now expected to launch in October. The “global currency” libra will likely never materialize.
This heavy-handed approach to digital currencies by governments and regulators has worried some in the bitcoin and cryptocurrency community.
“Going forward, either the project is fully decentralized or it has to be fully regulated,” said blockchain pioneer and managing director of investment management firm Yeoman’s Capital David Johnston.
Fortunately, highly decentralized cryptocurrencies and blockchains, such as bitcoin and ethereum, are very resistant to censorship and government control.
Previous attempts to ban or even “shut down” bitcoin itself have failed. Last year, it was revealed federal prosecutor-turned bitcoin and cryptocurrency expert Katie Haun was asked to look into “shutting down” bitcoin by her boss at the U.S. attorney’s office in 2012—something she said would have been impossible.
However, other countries, including China, Russia and Iran, have been able to restrict bitcoin use by cracking down on banks and companies offering crypto services.
China outlawed crypto exchanges in 2017 and went on to crack down on many bitcoin mining operations. China is now gearing up to launch a digital version of the yuan—something that itself threatens the dollar’s dominance if it doesn’t catch up.
“The trend for the next few years will likely be national cryptocurrencies, so the American monetary authorities do not need competitors [such as TON and libra] with such a wide audience coverage,” said Alex Kuptsikevich, FxPro senior financial analyst, adding the current size of the bitcoin and crypto market “does not pose a threat to the U.S. monetary power.”
“The American regulator could very much complicate the conversion of crypto into fiat. This is not happening just because the market is small. That’s why the issue is not on the top of the agenda. Nevertheless, we cannot rule out such a scenario after the official digital dollar appears.”
Decentralized cryptocurrencies are still reliant on government and company-controlled services and while they can’t be shut down they can be stifled.
“We are in a vicious circle: you can’t bring more balance to an overly centralized world exactly because it’s so centralized,” Durov wrote, underscoring what he sees as the gravity of the situation.
“This battle may well be the most important battle of our generation.”