Antivirus software and bitcoin pioneer John McAfee has warned that battle lines have been drawn between governments and cryptocurrencies following China’s recent moves to shut down the industry.
As reported, China imposed a ban on selling or trading virtual currencies earlier this month, leading to the imminent closure of the biggest exchange, and with others to follow suit.
In the case of China, the move is part of a wider crackdown on bribery, corruption and aggressive deal-making in policies championed by President Xi Jinping (pictured left) who has given speeches this year warning that “financial crocodiles” and “moles” will be hunted to extinction as reported.
Other governments and regulators will be more concerned with how to tax money traded and stored across numerous jurisdictions with problems of identity verification and location/jurisdiction.
There are also well-documented concerns by authorities to do with global cash flows within the US$150bn industry that some argue will aid criminals looking to launder profits made through illegal activities such as drugs and prostitution.
‘The beginning of the war between governments and bitcoin fugitives’
Speaking to the South China Morning Post, McAfee said that today “will go down in history as the beginning of the war between the proponents of cryptocurrency and the world governments,” and talked of the growing conflict between governments and the “fugitives” subculture of proponents and proselytisers of currencies.
“If governments aren’t able to know what the movement is they will be unable to collect revenues. That’s going to cause panic in some countries. China sees it already,” McAfee said.
Those in favour of virtual currencies argue that initial coin offerings (ICOs) are a low-barrier-to-entry mechanism by which, for instance, start-ups are able to raise finance for their projects.
‘Killing healthy cells alongside cancerous ones’
Emil Chan, vice-president of the Hong Kong Blockchain Society expressed the view that the recent actions taken by China have been disproportionate and may end up bringing unintended consequences.
He likened the reforms to aggressive chemotherapy in which, as well as destroying the cancer cells, many healthy cells are also killed, adding “What happened in China will kill a lot of projects regardless of whether they are decent ones or scams”.
McAfee rejected charges that virtual currencies are a modern-day “tulip bulbs”-like bubble, as JP Morgan chief executive Jamie Dimon described them last week, referencing a notorious market bubble of the 17th century.
Dimon added and said that if found any of his employees trading it he would “fire them in a second”.
‘Not a bubble but a real currency’
McAfee argued that, unlike tulip bulbs and other notorious bubbles, the idea that virtual currencies are intangible is not a fair criticism, saying that his firm, MGT Capital Investments, which mines bitcoin, incurred real expenses.
“It costs my company over US$1,000 to create one bitcoin. We are one of the largest bitcoin miners in America. We put work, time, electricity and a lot of preparation to create this coin. How much work does it need to create a $100 bill?”