“Safe” Status Of Bitcoin Reiterated After Republican Attack

The past week saw many leading cryptocurrencies posting double-digit gains, with the upward price action being escalated by the crisis hitting Credit Suisse, which needed a $54 billion loan from Swiss National Bank to shore up liquidity [1]. As a result, Bitcoin (BTC) soared amid the banking chaos, jumping from just over $20,000 on March 10 to trade at $27,537 at the time of writing. Ethereum’s growth was a similar story over the same period, rising from roughly $1,400 to today’s price of $1,740, per CoinGecko.

Several prominent figures in the industry pointed to Credit Suisse’s collapse and other collapses of crypto-friendly banks like Silvergate, Signature, and Silicon Valley Bank, all of which happened this month, to publicly shill Bitcoin and rehash its potential role as a “safe haven” asset.

However, in the U.S., several prominent Republicans rebelled against the idea of a Central Bank Digital Currency (CBDC), essentially a dollar-pegged cryptocurrency that would be issued by the Federal Reserve. Florida governor Ron DeSantis proposed an outright ban on CBDCs in his state, calling them “surveilling Americans and controlling Americans.” [2]

Ron DeSantis, the 46th governor of Florida, has proposed a new piece of legislation banning the use of digital currencies issued by the Federal Reserve or any foreign central bank [1]. According to DeSantis, a Fed-issued digital coin would promote surveillance and stifle innovation. He also argued that such a currency would diminish the role of community banks and credit unions in the financial system [1].

DeSantis is known for his efficient style of Trumpism and his success during the pandemic. He has gained a reputation for taking a hands-off approach to the pandemic by not implementing stringent restrictions like other governors did [3]. DeSantis also signed the “Stop WOKE Act,” which prohibits the teaching of critical race theory in Florida’s public schools [2].

A Central Bank Digital Currency (CBDC) is a digital version of an existing currency that would be backed by the full faith and credit of the issuing government. Talk of CBDCs heated up during the cryptocurrency boom of 2020 and 2021, which put pressure on governments to explore the potential issuance of their own digital currency. Proponents of CBDCs argue that a digital dollar would enable faster transactions with lower fees, improved efficiency with cross-border exchanges, and improved accessibility to the unbanked population [1].

Governor Ron DeSantis has proposed legislation to ban digital currencies issued by the Federal Reserve or any foreign central bank, arguing that it would promote surveillance, stifle innovation, and diminish the role of community banks and credit unions in the financial system. Despite the potential benefits of a CBDC, DeSantis believes that the drawbacks outweigh them.

Ron DeSantis is not the only one to publicly denounce CBDCs. Republican representative for Ohio’s 8th Congressional District, Warren Davidson, called CBDCs an “Orwellian payments system” and urged his colleagues to reject the idea. Similarly, Ted Cruz, the junior Senator from Texas, proposed his own legislative pushback against the idea of a Fed cryptocurrency. [3]

The White House also released this year’s Economic Report of the President, conveying Washington’s skeptical stance on crypto, calling it “highly volatile and subject to fraud,” and saying it “frequently reflects an ignorance of basic economic principles that have been learned in economics and finance over centuries.” Additionally, the United States Securities and Exchange Commission’s (SEC) thinly veiled crypto crackdown continued apace on Wednesday when the agency hit Coinbase with a Wells Notice, alleging that the exchange’s staking products constitute unregistered securities. [1]

Despite the pushback against CBDCs from politicians in the U.S., the upward price action in leading cryptocurrencies this week indicates continued investor interest in crypto as an alternative to traditional banking systems. The collapses of Credit Suisse and other crypto-friendly banks, along with the continued interest in Bitcoin as a “safe haven” asset, are likely to keep investor interest in crypto high in the coming weeks.

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