However, just a day later, the U.S. Department of Labor issued a warning about the potential pitfalls of offering digital currencies as investments. The department said that 401(k) plan sponsors should exercise “extreme care” before adding a digital currency option for plan participants.
Why is the Labor Department skeptical about digital currencies?
While some would argue that this is just a large, over-cautious government bureaucracy covering its tracks, the fact is, the labor department is right when it says that digital currencies and products related to them present “significant risks and challenges to participants’ retirement accounts, including significant risks of fraud, theft, and loss.”
At CoinGeek, we’ve been working for years to expose as much of this theft, fraud, and loss as possible in our Crypto Crime Cartel series. We’ve reported countless stories about exchange hacks resulting in losses worth millions, rogue exchange operators counter-trading their own customers, and the fact that the cryptocurrency industry is largely run by a group of criminals that would make Bernie Madoff blush.
While the digital currency and blockchain industries are touted as the next big thing by slick salesmen using a well-practiced selection of buzzwords, the fact is that even the best-known digital currency, BTC, is being passed off as Bitcoin to unsavvy investors who are sucked in by the lure of quick and easy returns. As for the other 13,000+ coins, the less said about them, the better.
It’s an industry rife with overhyped vaporware and projects claiming that they’ll someday solve problems that Bitcoin (BSV) solved long ago. So, it’s only right that the Labor Department and others tasked with looking after citizens’ interests should ask questions and urge caution. And asking questions is exactly what the Employee Benefits Security Administration (EBSA) intends to do. It says it will take action to protect the interests of 401K plan participants and beneficiaries. That includes asking providers who plan to offer a digital currency option to mitigate the highlighted risks.
The first question they should be asking is, “where do the returns come from?” That one question forces people to think and exposes how the industry works like a giant digital pyramid scheme.
A tidal wave of bankruptcies, lawsuits, and criminal convictions is coming
Perhaps some at the Labor Department have seen this movie before in the form of the 2001 Dot Com crash. In that particular bubble and subsequent wipeout, countless companies that were sold to investors as the next big thing went to zero virtually overnight. Michael Saylor, one of BTC’s largest promoters, lost more money than anyone else in the world at the time, and he’s poised to do it again 20+ years later.
The truth is that the Labor Department and other regulators would be wise to recommend that institutional investors and 401(k) plan participants and beneficiaries avoid investing in digital currencies altogether. 99.9% of it is fundamentally worth nothing, and once the negative externalities such as environmental damage and the facilitation of crime are considered, most coins are worth less than zero.
All of this will become apparent in the not too distant future. While digital currencies could experience another boom cycle, the game of musical chairs has to end at some point.
While President Biden’s executive order is indeed a step in the right direction for innovation and utility projects in the industry, it’s also the beginning of the end for the get-rich-quick schemes that have come to characterize the space. Hopefully, 401(k) plan providers will exercise the advised caution and protect hardworking people from the sharks that are currently circling their pension plans.
Watch: CoinGeek New York presentation, FYI: Better Information Tools for a More Lawful Blockchain Industry
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