Warren Buffett’s right-hand man calls on the U.S. to ban cryptocurrencies.
It’s an unsurprising uppercut — but its power comes from an important voice and will definitely hurt the cryptocurrency industry.
And the timing is unfortunate for the market since cryptocurrency tokens have been enjoying good momentum for a few weeks now.
Billionaire Charlie Munger, 99, has once again lambasted cryptocurrencies, to which he ascribes no positive utility. Quite the opposite: He’s calling on the U.S. to follow China’s example by simply banning them.
“In the U.S. in recent years, privately owned companies have issued thousands of new cryptocurrencies, large and small,” Munger wrote in an op-ed published in The Wall Street Journal on Feb. 2. “These have later become publicly traded without any governmental pre-approval of disclosures.
“In some cases, a big block of cryptocurrency has been sold to a promoter for almost nothing, after which the public buys in at much higher prices without fully understanding the pre-dilution in favor of the promoter,” the famous investor laments.
He calls it “wild and wooly capitalism.” And he harks back to a phrase attributed to Mark Twain: “A mine is a hole in the ground with a liar on top.”
Crypto Is ‘a Gambling Contract’: Munger
The vice chairman of Berkshire Hathaway, the holding company he leads with Chief Executive Warren Buffett, then delivers a murderous blow to cryptocurrencies.
“A cryptocurrency is not a currency, not a commodity, and not a security,” he writes. “Instead, it’s a gambling contract with a nearly 100% edge for the house, entered into in a country where gambling contracts are traditionally regulated only by states that compete in laxity.”
So what to do? Munger has a radical solution: “Obviously the U.S. should now enact a new federal law that prevents this from happening.”
To do this, he indicates that the American authorities should use “Two interesting precedents.”
“In the first precedent, the communist government of China recently banned cryptocurrencies because it wisely concluded that they would provide more harm than benefit,” the billionaire wrote.
“And, in the second precedent, from the early 1700s, England reacted to a horrible depression that followed the blow up of a promotional plan to get vast profits by using slow-moving sailing ships to trade with very poor people halfway around the world.”
He continued: “What the English Parliament did in its anguish when this crazy promotion blew up was direct and simple: It banned all public trading in new common stocks and kept this ban in place for about 100 years.”
Munger seems to suggest that there is no other solution, as the White House and Congress are currently busy developing regulations for the sector after the overnight collapse of the FTX cryptocurrency exchange. It was valued at $32 billion in February 2022 and imploded a few months later.
“What should the U.S. do after a ban of cryptocurrencies is in place? Well, one more action might make sense: Thank the Chinese communist leader for his splendid example of uncommon sense,” the billionaire said.
Bitcoin ‘Is Stupid’
The legendary investor’s op-ed did not halt the rise in cryptocurrency prices, even though it was generating a lot of commentary. The market was up 6.1% to $1.1 trillion at the time of this writing according to data firm CoinGecko.
Bitcoin, the most popular cryptocurrency, was up 4.3% to $24,062.63 in the past 24 hours.
Munger and Buffett are staunch opponents of cryptocurrency. Last year, they thrashed bitcoin and cryptocurrency at Berkshire Hathaway’s annual shareholder meeting.
“I try to avoid things that are stupid and evil and make me look bad, and bitcoin does all three,” Munger said at the time.. “It is stupid, could go to zero.”
Buffett, 92, didn’t mince words either.
“I you tell me you own all the bitcoin in the world and you offered it to me for $25, I wouldn’t take it because what would I do with it? It is going to do anything,” the Oracle of Omaha said harshly. “If I try to get rid of it, why should I buy some bitcoin?”
He once said that the world’s first cryptocurrency is “probably rat poison squared.”
“Whether it goes up and down, in the next year, or five or 10 years, I don’t know. But the one thing I’m pretty sure of is that it doesn’t produce anything,” Buffett said last April. “It’s got a magic to it and people have attached magic to lots of things.”