COMPLIANCE
In the same vein , old-guard financiers are quick to deride its potential . Warren Buffett also has made a number of derogatory comments about crypto ’ s lack of utility . In one noteworthy comment at the 2022 Berkshire Hathaway annual meeting , he exhorted that he would not take “ all of the Bitcoin in the world … for $ 25 . I wouldn ’ t take it because what would I do with it ? … It isn ’ t going to do anything .” Buffett went on to compare a farm that produces food and an apartment that generates rental income as assets with purpose . 8
What Buffett gets right about bitcoin and , by extension , crypto is that it has no intrinsic value as opposed to livestock or improved real property . What he misses is that a dollar bill and , by extension , all fiat currency have no innate value . A dollar bill is a piece of paper . Further , all the minted currency in the world does not equate to the “ money ” that people have deposited . It is an illusion that fiat currency is a total representation of value , but it is not fiction because the value — whether present or future — is there . It is there because we agree it is there . This same illusory value exists with crypto so long as people keep the contract alive . Unlike fiat currency , most cryptocurrencies are not backed by the government , which means that the contract cannot be as easily or reliably enforced , which is a negative feature and one that might ultimately keep it from mass use . For crypto to obtain true credibility as a transactive force , it needs a foundation of accountability either administered by the government or a consortium of global exchanges .
Sharing the stage with Buffett at the aforementioned Berkshire Hathaway annual meeting was Vice Chairman Charlie Munger , who , like Buffett , provocatively mocked crypto , exclaiming that “ in my life I try to avoid things that are stupid and evil and make me look bad in comparison to somebody else and Bitcoin does all three .” 9 ( Interestingly , he seems willing to embrace all three so long as he is not compared to someone else .) He continued , “ It ’ s stupid [ because ] it ’ s very likely to go to zero . ... It ’ s evil because it undermines the Federal Reserve System and the national currency system … and it makes us look foolish compared to the Communist leader in China . He was smart enough to ban [ crypto ].” 10 His second point about the Federal Reserve System and the national currency is noteworthy because of its potential to be used , controlled or manipulated by nation-states or stateless actors to destabilize global economies and U . S . national security . This derivative prospect of decentralized crypto or digital currency is often drowned out by louder conversations , but it should be amplified before the utility of crypto scales .
Berkshire Hathaway Chairman and CEO Warren Buffett ( left ) and Vice Chairman Charlie Munger ( right ) field questions at the company ’ s 2016 annual meeting , which was livestreamed on Yahoo ! Finance . Photo courtesy of Richard B . Levine .
Crypto credibility
At this point , it may be worth asking how something that simultaneously circumvents government oversight and the highly regulated international financial system can comply with anti-money laundering ( AML ) protocols , whether that is a fair expectation and if cryptocurrency regulation is an oxymoron .
One of the most important components in an AML regime is regulation and adherence protocols similar to the Bank Secrecy Act . 11 With crypto , notions of know your customer ( KYC ) become obfuscated , with people being replaced by private addresses or keys . So how do all the entities required to perform KYC , due diligence , monitoring and transactional review fulfill their duty to tamp down money laundering vis-à-vis crypto ? In a 2018 article published in ACAMS Today , Chris Phillips identified placement — the first stage in the money laundering cycle where illicit proceeds transform from fiat to crypto — as a chokepoint where law enforcement and compliance officers could monitor crypto
52 acamstoday . org