World-renowned investor calls for cryptocurrency ban and becomes cause for ridicule
Economist and Berkshire Hathaway VP Charlie Munger published an article in The Wall Street Journal the previous day criticising the cryptocurrency industry. In his piece, Munger called crypto “a gambling contract with an almost 100% casino advantage,” and suggested that the U.S. government should ban digital assets altogether, following the example of China in 2021. We tell you about the investor’s point of view and the response from the blockchain community.
As a reminder, in 2021, the Chinese government imposed serious sanctions on crypto business in the country. In particular, Bitcoin mining was completely banned in the country, although some Chinese miners are still working to circumvent the bans.
Munger himself is a fairly regular critic of digital assets, while demonstrating a complete lack of understanding of what is going on in the industry. In December 2021, for example, he said that cryptocurrency creators are supposedly only concerned about their financial health. That said, Munger says he cares about customers when trying to sell them something.
Cryptocurrency investor
In February 2022, he confirmed that he has not invested in cryptocurrencies. He also compared them to STDs for some reason. Read more about this in a separate article.
What Bitcoin is being criticised for
As we’ve noted, Munger has criticised cryptocurrencies many times in the past and has joined his business partner Warren Buffett on the issue, who also sees no point in buying digital assets. A few years ago, Tron founder Justin Sun even tried to change Buffett’s mind in a private conversation over a paid charity dinner, but was never able to shake the billionaire’s confidence that he was right.
Investor Charlie Munger
This time, Munger stated that crypto “is not a currency, a commodity or a security”. That’s why the US government “obviously” needs to pass a new federal law that would impose a complete ban on digital assets. Most interestingly, the 99-year-old investor didn’t skimp on epithets to express his admiration for the actions of the Chinese government, whose position is generally considered too authoritarian in the world. Here’s Charlie’s relevant line.
What should the US do after the cryptocurrency ban? Well, one more action might make sense: thank the Chinese communist leader for his great example of unconventional thinking.
It is important to understand that a possible legal ban on interaction with cryptocurrencies would not essentially prevent citizens of a certain state from interacting with them. If a person uses a non-custodial wallet and self-controls the sid-phrase from their own addresses, then nothing will happen to their digital assets. Well, he will be able to dispose of them as he sees fit, and not depend on the decisions of officials.
Charlie Munger’s article proposing a ban on cryptocurrencies in the US
Of course, Munger’s statements have not bypassed the cryptocurrency community. Here’s what a popular crypto-enthusiast under the nickname adamamcbride tweeted in response to the billionaire’s article. His retort is cited by Cointelegraph.
Sides of the war are looming. Freedom or tyranny. Non-custodial wallets are a height we must not surrender.
As a reminder, non-custodial wallets are precisely those interfaces for interacting with digital assets that allow you to control your cryptocurrencies by storing private keys. With cryptocurrency exchanges or other centralised services, for example, a person does not have that option, but instead the storage of private keys and SidPhrases is handled by the management of the platform.
Charlie Munger and Warren Buffett
A user under the nickname level941 noted that even a radical government would not be able to completely eliminate the crypto industry as a phenomenon – and indeed it is. Here’s his rejoinder.
It’s sad that Charlie Munger thinks he’s making a difference with prohibition. What he doesn’t realise is that it’s maths – and it can’t be banned. Old age robs us of critical thinking.
It's probably not even about critical thinking, but the inability to recognise the potential of digital assets after interacting with them. After all, Munger is 99 years old, so he might not even know how to use email. Well, it takes a lot longer to master cryptocurrencies - especially given the abundance of misconceptions around decentralised assets.
Charlie Munger and Warren Buffett
According to sources, the aforementioned China is still home to a significant portion of Bitcoin mining capacity. However, the country has been on a long road to banning cryptocurrencies, imposing new restrictions literally every year. It would be almost impossible and impractical to do something like that in the US. It would cost the government more to fight miners instead of collecting taxes and replenishing the budget.
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Incidentally, even in China itself there is a debate about whether sanctions on the crypto sector can be relaxed. Huang Yiping, a former member of the Monetary Policy Committee of the People’s Bank of China, believes that the Chinese government should reconsider whether a ban on cryptocurrency transactions is a good idea in the long term.
The former official argues that a permanent ban on cryptocurrencies could lead to the loss of many opportunities for the traditional financial system, including those related to blockchain and tokenisation. Cryptocurrency-related technologies are “very valuable” to regulated financial systems. Here’s his rejoinder.
Banning cryptocurrencies may be practical in the short term, but will it be useful in the long term? There is no single way to ensure the stability and functioning of the cryptosphere – especially for a developing country – but an effective approach may still have to be found eventually.
Huang also acknowledged that China’s central bank digital currency (CBDC) has not been widely adopted, although it was launched years ago. He added that allowing private institutions to issue steblecoins based on the digital yuan remains a “very delicate” issue, but the pros and cons of such a thing are yet to be considered.
Chinese yuan
We think such comments by Charlie Munger are detrimental to the cryptocurrency industry. And while fans of decentralized assets won't stop loving them because of the 99-year-old investor's criticism, people outside of the cryptocurrency world may be put off by it: after all, Munger has made a lot of money, which means he should kind of know about investing. So crypto enthusiasts need to keep fighting such claims and prove the usefulness of crypto in practice, not in the papers.
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