The Treasury has been weighing its options in the wake of the ongoing financial crisis with a trillion-dollar coin being in the cards. However, that move has not been welcomed by many as some nations are moving away from the US dollar which could lead to de-dollarisation and stripping off of its stature as the world reserve currency.
However, economists have presented a trillion-dollar gold solution to curb the US debt crisis. This creative alternative has popped up as all hands in the economic space suggest various remedies to the looming economic fiasco.
Re-monetization and revaluation of the US gold reserves could accumulate trillions
In less than 30 days from now, the treasury could run out of money, thus defaulting its debt and plunging the country into an unimaginable economic implosion. This possibility is most likely to occur if the ongoing standoff between the Republicans and the Democrats regarding raising the debt ceiling goes unresolved. As a result, economists have proposed re-monetizing the gold reserves as yet another creative remedy to curb the looming catastrophe.
TRILLION DOLLAR COIN — OR TRILLION DOLLAR GOLD?
The Treasury might run out of money. It can't borrow till the debt ceiling is raised. And as of right now, there's no agreement in sight.
But rather than a trillion dollar coin, the US could remonetize its gold. It has 261… pic.twitter.com/oqKHas2CCX
Currently, the treasury has about 261 million ounces of gold in its reserves which it values at $42.22. This rate dates back to the 70s when the US went off the gold standard. Therefore, it is almost 50 times less than the current market price of $2035. Economists have pointed out that the Fed Reserve bank manual instructs that the treasury can mandate the Fed to re-monetize and revalue its gold reserves.
Fed Reserve Banks operating manual says Treasury can instruct the Fed to revalue US official gold, every $4,000/oz deposits $1 trillion into TGA.
I figure at $20,000/oz, Tsy could buy back enough USTs to get debt/GDP back down to 50% or so, then Fed could normalize w/no problems
As such, they have proposed a revaluation of up to $20,000 per ounce, summing up to a trillion-dollar gold remedy. If the market accepts the rate, it will provide up to $5 trillion in gold, an annual federal budget. This amount will offset the cataclysmic crisis by buying back USTs and reducing the debt by 50%.
The proposal draws a tsunami of negative reactions from the Twitter financial community
The trillion-dollar gold has attracted much negative attention from Twitter financial pundits. Fort Knox has not been audited for more than 60 years now, and some users were skeptical of the existence of the said gold reserves. The Republican representative for West Virginia’s 2nd district, Alex Mooney, introduced a bill in 2021 seeking to audit the US gold reserves, but it has been stalled to date. The US treasury cannot allow auditors into the maximum security storage, raising questions about the mere existence of the reserves.
Are the stated gold reserves actually there?
Fort Knox hasn’t been audited in 60 YEARS. @RepAlexMooney introduced a bill to physically audit Ft. Knox [1], but it hasn’t gone anywhere in years.
In 2017 @FT asked “Would it matter if Fort Knox turned out to be empty?” [2]
In addition, the revaluation might deeply enrich its geopolitical rivals like China and Russia, who have been accumulating gold over the past decade. The BRICS New Development Bank (NDB) is set to release a gold-backed currency later this year. Such revaluation could empower the currency to the dollar’s detriment as the global reserve currency.
The problem is the #debt, not the ceiling. The problem will never be solved if #Congress keeps raising the ceiling. The U.S. is definitely headed for a sovereign debt and dollar crisis, but not because Congress fails to raise the #DebtCeiling , but because it succeeds!
Even so, the pro-gold economist Peter Schiff has explained that the underlying problem is the debt, not the debt ceiling. In his tweet, Schiff emphasized that the US sovereign debt and dollar crisis will occur not because of the failure of Congress to raise the debt ceiling but by its success.
Bittrex crypto exchange has revealed that they have filed for bankruptcy, and the Treasury’s Office of Foreign Assets Control is its largest creditor.
Bittrex to instigate more pain in the crypto space?
2022 was one of the hardest years for the crypto space as several companies went down, dragging the whole market with them. Some, like FTX and Terra ecosystems, brought fear to the crypto space due to huge instances of fraud being unearthed.
Other major organizations like Genesis, Celsius and BlockFi went down in the same year. Now, one more organization, Bittrex, has gone down. The exchange was under probe by the Securities and Exchanges Commission, which led to its charging in April because of running an unregistered securities exchange.
Bittrex went ahead to cease operations towards the end of April with plans to end its US-based platform’s presence in the market. However, it said that the bankruptcy proceedings in the US would not impact its international customers.
Its May 8 court filing shows that it was founded in 2014 and accrued 100K US-based creditors during its lifetime. It also stated that it has liabilities of between $500 million and $1 billion. Additionally, some US customers still have yet to withdraw their funds from the exchange.
Now that the bankruptcy proceedings have kickstarted via Yesterday’s filing, the US customers will have to wait longer before they can finally withdraw their funds. Keep watching FinTech Express for updates on finance and banking-related news.
Coinbase Executives have visited the United Arab Emirates to see if the country would be favorable to setting up their global presence. Due to regulatory uncertainties, the crypto exchange has been looking for alternatives to the U.S. and now is weighing whether the UAE could be a perfect match for it.
Coinbase actively searching for a way out from U.S. legal battles
The exchange’s Chief Executive Officer Brian Armstrong has taken another shot at the U.S. regarding its crypto treatment claiming that they are trailing behind. He made these comments at the Dubai FinTech Summit on May 8, 2023.
— Brian Armstrong 🛡️ (@brian_armstrong) May 8, 2023
In a May 7 blog post, Coinbase stated that its CEO Brian Armstrong and some of its Executive team were discussing the feasibility of using UAE as a strategic hub for the exchange. According to the company, it was working closely with the regulators in the Abudhabi Global Marlet and DUbai’s Virtual Assets Regulatory Authority as part of efforts to expand into the region potentially.
“The UAE is exciting for us as a potential hub to build as well, an international hub for Coinbase that could serve not only in the Middle East but parts of Africa or other countries in Asia,” said Armstrong at the Dubai Fintech Summit on May 8. “I think the U.S. right now is a little bit behind in regulatory clarity and some of the rhetoric from the top.”
UAE has become a leader in promoting crypto adoption, allowing VASPs like Binance to thrive and operate there. It does not have laws barring these exchanges from offering their services and does not have a ‘dirty’ history of charging organizations.
As such, many Web 3 and crypto organizations are turning to the country to set up their premises to go international. Now Coinbase seeks to follow suit following its announcement on March 2 that it was launching the Coinbase International Exchange.
These efforts by the exchange follow when a battle with the US SEC is in the cards. The exchange’s CEO has repeatedly hit the regulator for not encouraging crypto technology in the country. He also shot at the SEC for using enforcement measures rather than harmonizing regulatory efforts.
The SEC has already issued a Wells Notice to the exchange showing intent to charge it for operating ‘against’ U.S. laws. Keep watching FinTech Express for updates on the story as it unfolds.
A class action lawsuit has been proposed against Coinbase regarding the violation of customer privacy via biometrics collections. The lawsuit claims that the company went against the privacy laws set in Illinois when it collected and stored its users’ fingerprints and facial scans biometric data.
Illinois resident challenges Coinbase’s KYC process in court
The lawsuit was filed on May 1 in a California District Court by one of the exchange’s users claiming that the requirement for a customer to upload pictures of their valid government ID and Self-Potrait for Know Your Customer checks (KYC) may be violating certain provisions of Illinois’ Biometric Information Privacy Act (BIPA).
The court filing argues that the requirement for users to give Coinbase their biometric data shouldn’t be mandatory, according to BIPA. It explains that the company should rather ask for permission from Illinois residents to collect their data and include information on how long it intended to store it, how it would be using it and the steps involved in the permanent destruction of the sensitive data.
“Coinbase had no written policy, made available to the public, establishing a retention schedule and guidelines for permanently destroying biometric information,” the suit argued.
Coinbase lawsuit May 1 2023
The complainant argues that Thousands of Highly detailed geometric maps of the face have been wrongfully taken, processed and stored by the company against the will of Illinois residents. It explains that the actions by Coinbase in the collection, usage and storage of the data pose serious and irreversible privacy risks.
The lawsuit added that in the case of Coinbase’s database hacking, Illinois residents would have no means of preventing identity theft. It stressed that Coinbase is in the wrong for lacking transparency in destroying the data permanently once a user opts to close their trading accounts.
The lawsuit seeks the payments of damages of $5,000 per intentional BIPA violation or $1,000 per violation if the court finds out that the company did not go against the regulations willingly.
The KYC process used by Coinbase is similar to all other crypto exchanges. As such, the direction of this case rests with the court process. Keep watching Fintech Express for updates on this and other FinTech-related news.
U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler says the regulator needs extra funding to keep up with emerging capital markets like crypto. He has supported President Biden’s request to add $2.4B in funding to the SEC to help crack down on crypto “misconduct.”
SEC seeking funding to continue cracking down on crypto
The U.S. SEC is all out to ‘streamline’ the crypto space by requesting an extra $2.4B in funding to help regulate the space. Its Chair, Gary Gensler, voiced his testimony on March 29, 2023, budget hearing with the House Appropriations Committee, saying that his commission needs more money to keep up with the ongoing innovation.
In his words, Gary Gensler said:
“Rapid technological innovation in the financial markets has led to misconduct in emerging and new areas, not least in the crypto space. Addressing this requires new tools, expertise, and resources.”
https://youtu.be/ZDDWLeeiHv4
He explained that the 2022 budget increase helped them bring staffing levels above what was recorded in 2016 for the first time. However, it is still not good enough, as the commission is finding it tough to match the growth rate of bad actors. He also revisited his previous comments calling crypto wild west once more.
SEC wants to become busier with the crypto space
The SEC has been busy in the past few months as it has been seen charging individuals and crypto organizations openly. It has charged Kraken, Justin Sun Linsay Lohan, Jake Paul, Beaxy crypto exchange, FTX, SBF, Terraform labs, Do Kwon, Gemini, Genesis, and others.
Today we charged crypto entrepreneur Justin Sun and three of his wholly-owned companies for the unregistered offer and sale of crypto asset securities Tronix and BitTorrent.
— U.S. Securities and Exchange Commission (@SECGov) March 22, 2023
The commission also warned about charging Coinbase for offering some ‘questionable’ services in the U.S. without its approval. Now, its Chair has expressed interest in going further with its efforts by asking for more funding.
In the budget hearing, Gensler explained that they had received 35,000 separate tips and complaints in 2022. These tips helped them serve over 750 enforcement actions and orders for over $6.4B in penalties and disgorgements. He added that a third of these complaints were connected to the crypto space, which shows an increased need for regulation.
Investments in crypto asset securities can be exceptionally volatile & speculative, & the platforms where investors buy, sell, borrow/lend these securities may lack important protections for investors. @SEC_Investor_Ed to investors: exercise caution w/ crypto asset securities.
— U.S. Securities and Exchange Commission (@SECGov) March 23, 2023
Keep watching Fintech Express for updates on regulation and other finance-related developments
A Delaware bankruptcy judge has ruled to allow FTX to sell Sequoia Capital Fund to the Abu Dhabi investment arm.
Abu Dhabi Investment arm to purchase FTX related Sequoia Capital Fund
A Delaware judge has approved the sale of Sequoia Capital Fund to the Abu Dhabi investment arm, according to a March 28, 2023, court filing. The ruling was made to answer a declaration request filed by FTX on March 8.
Judge John Dorsey has declared that the sale of the Capital Fund to Al Nawwar Investments RSC limited has satisfied all the required standards per the US bankruptcy law that prevents the unduly hasty sale of assets and thus should proceed.
FTX also requested the judge to offer an indefinite delay to the sale of its stock-clearing business, Embed. Embed was initially used as a solution to facilitate a quick raise of funds for outstanding creditors. The hearing for the sale of Embedd has been scheduled for March 27 but is now on hold “until further notice.”
FTX was plagued by too high withdrawal requests than its treasuries had in November 2022, leading to the company filing for Chapter 11 bankruptcy proceedings to help protect its assets and liquidate them. The developments led to investigations that saw its CEO, Sam Bankman-Fried, arrested and charged with one of the most prominent cases in the US.
The case against Sam Bankman-Fried is continuing in tandem with the bankruptcy proceedings. Keep watching Fintech Express for updates on these and other finance-related news.
