The American Government Like El Salvador Is Now Into Cryptocurrency

I have my views about cryptocurrency and welcome yours. Let me share. To me crypto has always been a Ponzi scheme. The coins are manufactured by computer algorithms in a process called “mining” that consumes more electricity than some mid-sized cities. The coins are whimsy, a magical creation that acquire value through magical thinking.

Cryptocurrencies promise unrealistically high returns for investors, making them attractive to those who like to bet. This should be a red flag to buyers but it isn’t in our current world where legalized betting and sportsbooks abound.

Crypto lives in a largely unregulated world. It is scammer and fraudster heaven. Purchasers of crypto coins only see the promise of high returns without understanding how the crypto market works.

Bitcoin: The Currency That Started It All

Bitcoin was the first cryptocurrency. Its performance shows the volatility of a coin created from thin air. Some would argue that paper currency is also created from thin air since today’s American dollar is no longer pegged to a gold standard. By that, I mean you cannot go into a bank and trade a U.S. dollar for gold dust or a nugget.

The difference, however, between cryptocurrency and paper money is this. Paper money to make purchases instead of gold or other precious metals goes back to China, where it was invented back in the Middle Ages. We accept the value of paper currency and metal coins containing no silver or gold because it has become part of our society. It is only when inflationary pressures spike that we lose trust in them. Cryptocurrencies aren’t printed by governments. They are created by mining done on computers that use a lot of electricity. Cryptocurrencies are mined in data centres dedicated to churning out new coins.

Scammers have found these coins to be a potential gold mine. One of those scammers is Donald Trump, who, although the President of the United States, has a history of ripping people off with his fake university, his digital tokens, and now a cryptocurrency he has launched as well as one that his wife has issued. The President and chief scammer of the United States now wants to establish a “Crypto Strategic Reserve.” He has a plan to include more than Bitcoins, including little-known cryptocurrencies to be held by the government as a “reserve asset.” One wonders if the coin he has issued and the one released by his wife will be in the mix.

Trump may see Bitcoin as the replacement for the old gold standard. Maybe he should be looking at the history of crypto when a country decides to use it this way.

The El Salvador Bitcoin Experiment

In September of 2021, El Salvador adopted Bitcoin as the country’s legal tender. That meant it was the currency of record for businesses to use to collect fees and for the government to accept for tax payments. A mobile app called the Chivo wallet was created for Salvadorans to store and use their Bitcoins with each citizen who downloaded the app receiving a $30 Bitcoin reward.

El Salvador also uses the U.S. dollar as its currency despite its adoption of Bitcoin as legal tender. Right from its initial use, only a small percentage of Salvadorans adopted Bitcoins for daily transactions. Street protests erupted with many Salvadorans lacking bank accounts. Merchants balked and would only accept American dollars.

Four years later, hacking incidents undermined the Chivo wallet app and eroded trust. The vast majority in the country ignored Bitcoin with a survey conducted by the Central American University showing 92% of respondents refusing to use it.

El Salvador recently reversed its Bitcoin decision. This retreat came about because the country’s application for a loan from the International Monetary Fund (IMF) was rejected. After all, Bitcoin was being used as legal tender. It has left the country with Bitcoin reserves amounting to over 6,000 coins with a present value of around $600 million. Crypto volatility may soon make El Salvador’s Bitcoin experiment an economic catastrophe.

Argentina and Other Crypto Disasters

Argentina’s President, Javier Millei, began promoting a currency this last February that was called $LIBRA. His adventure into crypto encouraged Argentinians tp spend their pesos buying the crypto coin. Over $100 million was invested in $LIBRA reaching a market cap of $4.6 billion before the currency crashed. The incident has damaged Millei and been given the name “Cryptogate.”

Canada’s story isn’t about government investing in crypto. It is about QuadrigaCX a cryptocurrency exchange  that in 2019 collapsed when its founder and CEO, Gerald Cotten, suddenly died having given no one the password to his laptop computer where all the Bitcoins were stored. Almost $190 million in cryptocurrency could not be recovered, leaving 115,000 investors hung out to dry.

Bernie Madoff-styled Ponzi schemes and other fraudulent practices abound in the world of cryptocurrencies. Here are a few of the more memorable ones:

• BitConnect, a cryptoexchange that operated from 2016 to 2018, offered to trade Bitcoins for its BitConnect Coin with promises of returns up to 40% per month. The total fraud amounted to over $2.4 billion.
• PlusToken, a Chinese Ponzi scheme, took investors for $6 billion by purchasing and trading Bitcoin, EOS, and Ethereum coins.
• BitClub was a Bitcoin miner in business from 2014 to 2019 that defrauded investors of $722 million without ever mining a single coin.
• MMM Bitcoin involved 10 million people in a Ponzi scheme that raked in $1.5 billion.
• OneCoin defrauded investors between 2014 and 2017 of $4 billion.

Need I go on with the latest fraud from Trump and his wife, Melania, who launched cryptocurrencies called $TRUMP and $MELANIA before the president’s inauguration. $TRUMP reached a market cap of over $14.5 billion before slumping and $MELANIA rose to $13 before declining to 90 cents. Investors took a bath.

Now Eric Trump, one of Donald’s sons, is hyping cryptocurrency. Critics of these launches argue that the meme coins are a clear conflict of interest, particularly considering the President’s plans to create a U.S. strategic crypto reserve.

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