Musings on Cryptocurrency Maximalism, Stocks, Capitalism and Regulations

Regulations, regulations, regulations! Many of us libertarians, myself included, want to live in a world without bureaucrats and we know regulatory agencies are no saints. But how many of us really want to forego a comfortable retirement because we refuse to play the game of the state. That game is to accept government (the state) as a business partner in our investing. Young people with lower incomes don’t see the potential of reducing their effective tax rate but there are a lot of older white collar professionals who regret they did not build up unrealized gains in some asset over the years. For example stocks. Older white collar people are usually in a higher tax bracket (28%) than the long term capital gain tax (15%) and if they invested over the years they could reduce their effective tax rate by realizing some gains. But the way to do that is through regulated markets and allowing the state to be your business partner.

I have been revisiting my ideas of where crypto finance would take capitalism. I was hoping crypto finance would allow people to invest in stocks anonymously. But I then figured the shares of stock would have to be traced at some point. And those are at regulated investment services. So even if you think you could be anonymous, the crypto finance site you use would have to have traceability. The stock markets are all regulated so they would make sure the exchanges / brokers they work with are also compliant.

There are two ways to buy shares of stock in a company without a broker. One is through a discount brokerage. And those trades the brokerage itself makes in turn are regulated by the government. The other way is through a Dividend Reinvestment Plan directly with the company you want to invest in. But of course the company is compliant with the regulations.

The second approach might possibly become a token investment plan. But whether token or stock, the corporation is compliant with regulations or is subject to litigation.

Simon Dixon is a Bitcoin enthusiast with https://bnktothefuture.com and his business is described in his website at the “about” section from the link: “BnkToTheFuture is a global online investment platform that allows qualifying investors to invest in financial innovation including FinTech (Financial Technology) companies, funds and other new alternative financial products.”

Simon and his company promote and adhere to regulatory agencies in their business practices.

Note Fintech can simply be regarded as a new sector of investment. The funding of the investments may be Bitcoin or fiat. But Simon Dixon seems to take pride that it’s not the stock market. They issue tokens.

That is okay. They act as stocks but the word “tokens” is different. Think Fintech as a sector of the market of hundreds of sectors. Airlines, utilities, agriculture, retail stores, hotel industry, computer hardware, and so on, are sectors.

Simon mentioned recently on Adam Meister’s show that people under 35 do not want to invest in stocks. If that is true, they are making a serious mistake, but I will get to that later.

Now let’s turn to Shapeshift Prism. Shapeshift Prism currently is an unregulated exchange where investors use ethereum to invest in a variety of tokens (each token has a color mapped to it and your own selected tokens create a prism. You, the investor, are the holder of the private key and you always control it). The leader of Shapeshift, Eric Voorhees, mentioned in some podcasts that Prism can eventually be extended to other asset classes such as gold. I don’t know how regulated gold is as a commodity but I can buy and sell gold with fiat cash already under a certain threshold without KYC (know your customer). I doubt Prism can be extended to stocks. The stock market is very regulated, especially due to fixing loopholes discovered during crashes such as dot com era companies. Besides, the “Oracle” in prism must still interact with regulated companies to purchase or sell stock for you.

I was hoping to be able to invest in stocks with ethereum much the same way as investing in prism. But I am convinced it’s always going to be regulated as long as we have government.

In comes Robinhood. Robinhood is a thoroughly compliant (with regulations) app with which you can trade a variety of cryptocurrencies and stocks. Although you cannot buy stocks directly with cryptocurrency you can sell a token and use the proceeds of that sale to buy shares of a stock. Or you can sell shares of a stock and use the proceeds to buy cryptocurrency. By “proceeds,” it’s fiat. The key is to avoid keeping the proceeds in fiat as it will be used for fractional reserve.

I think Robinhood is the best crypto capitalist application. It is far more interesting than Fintech and far more extended. It introduces cryptocurrency maximalist to capitalism and the importance of investing in companies.

Remember cryptocurrency is meant ultimately to be a currency. A medium of exchange. It’s not there yet but is a store of value, an investment. But the smart young investor will own both cryptocurrency and stocks in companies. What easier way is there than Robinhood?

Here is my idea of where cryptocurrency will fit in: I think yes, it will replace central banking and fiat. No, it will not end the state, but may severely curtail inflation and finance of warfare. It will bring a more peaceful world. No it will not out perform stocks in the long run. Cryptocurrency is currency. It will be a tool to buy and sell and invest in other asset classes.

It’s disappointing to see some young popular cryptocurrency video personalities laugh off stock investing and favor putting all their money into cryptocurrency. Those same people like to think of themselves as capitalists. Do they really know the definition of capitalism? Currency is a means to raise capital through investing in stocks.

But regulations will be with us for awhile. You do not have to give up libertarianism to have a comfortable retirement, rather, the world needs more wealthy libertarians.