Crypto's Legal White Space: Fact Or Fiction?

Though they walk and quack like ducks, players in the cryptocurrency ecosystem insist that they are birds of a different feather. Both the crypto players and regulators appear to want regulation for crypto — but an apparent impasse remains because of the mistaken belief that crypto exists in a legal white space. We claim that cryptocurrency is already subject to the existing laws and regulations of finance. It is time for all involved to give up the pretense that crypto transactions require substantively new rules. However, when the crypto industry asks for clear regulations, it is asking for new, special regulations that apply only to its not-loans of not-money, and trades of not-securities on its not-exchange.

With its disdain for the law and human institutions, crypto strikes at the heart of the market order. Free markets and freedom of choice alone cannot produce prosperity. The classical-liberal canon is clear that free markets depend on the rule of law, as well as the human institutions that stand behind it. Nobelist Friedrich Hayek observed that liberty does not exist as such; rather, it must be constituted by law.

The government itself must be completely invested in the continued existence and improvement of its institutions. Government must, therefore, force crypto into the existing rubrics of its laws and regulations, based on the functions for which crypto is manifestly used. Anything less would grant the crypto industry an enormous privilege and make a sham of the rule of law.

Click here to read my article in National Review, co-authored with Matt Sekerke.

Steve Hanke's Take on the $1 Trillion Platinum Coin Idea

In an interview with David Lin of Kitco News, I present my take on the idea of a $1 trillion platinum coin. This plan, which originally appeared in the Great Recession, was dreamed up by a government bureaucrat as a workaround to the U.S. debt ceiling.

The debt ceiling is a constraint on the U.S. Treasury's issuance of more debt to finance the government. That's where a $1 trillion platinum coin comes into play. In principle, this is how the workaround would function. If Treasury issues a $1 trillion coin, it would deposit the coin at the Fed. Then, Treasury can draw on its account at the Fed, creating money. The binding constraint of the debt ceiling would be lifted.

But, the problem with this idea is that the statute that covers the denomination of coins is not clear whether Treasury can issue tokens instead of bullion or proof. To issue bullion or proof, Treasury would actually have to buy the $1 trillion of platinum to make the issuance. And since Treasury cannot issue tokens, based on my interpretation of the statute, this whole idea would just be a wash — a gimmick.

Click here to watch my interview on Kitco News.

Steve H. Hanke

Professor of Applied Economics

The Johns Hopkins University

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