by Doug Casey, Casey Research:

Chris’ note: Chris Reilly here again, managing editor of Casey Daily Dispatch.

On Thursday, Silicon Valley insider Jeff Brown told us why the government is cracking down on cryptos. Specifically Libra, Facebook’s own digital currency.

Today we turn to Jeff again, who just returned from Washington, D.C. with more on this subject. As you’ll see, the feds are terrified right now… but there’s something you need to know…

By Jeff Brown, editor, Exponential Tech Investor

I just got back from Washington, D.C. And there was one topic everybody wanted to discuss…

“This is indeed a national security issue. We will not allow digital-asset service providers to operate in the shadows.”

That’s what Treasury Secretary Steven Mnuchin said about Facebook’s cryptocurrency, Libra, on July 15.

He added that the Treasury Department has “very serious concerns that Libra could be misused by money launderers and terrorist financiers.”

And Mnuchin isn’t alone.

Federal Reserve chair Jerome Powell said Libra “raises serious concerns regarding privacy, money laundering, consumer protection, financial stability.”

Even President Trump made his feelings about Libra known:

Why are high-profile policymakers taking aim at Libra? I think I know the answer…

And it has little to do with concerns over money laundering.

The Facebook Coin

For readers who haven’t been following the story, some context might be helpful.

Facebook’s cryptocurrency, Libra, is a stablecoin. A stablecoin is a cryptocurrency that is pegged to an existing asset. In this case, Libra will be backed by a basket of international currencies.

Libra will be governed by the Libra Association – a group of 27 companies and Facebook. Facebook claims this will allow the currency to be governed in an open and transparent way… and that it won’t give one company too much influence over Libra.

Given that Libra will be a stablecoin, it will have low volatility. That will be attractive in countries without a stable currency, like Venezuela and Argentina.

Stablecoins are also attractive for use in daily purchases. After all, who wants to use a currency that might fluctuate 10% a day? It is very difficult to budget for daily necessities when there are high levels of volatility.

That means Libra could be used for small value payments and as a store of value in certain markets.

With Facebook’s global user base of 2.7 billion, it won’t take long for the coin to gain adoption.

So why, then, are government officials taking aim at Libra?

The usual line is that Libra would be used to finance terrorism or other illicit activity. This critique isn’t unique to Libra. Bitcoin’s critics have been saying this for years.

But let’s think about that rationally…

Bitcoin on the Dark Web

This year, $1 billion worth of bitcoins will be spent on the dark web for illicit purposes. That’s going by a report from blockchain analysis company Chainalysis.

The dark web is a hidden part of the internet that you can’t get to with normal web browsers. You need specific software to find it. And as you likely know, the dark web includes online markets for drugs and other illicit goods.

So, $1 billion in bitcoins will be spent on illicit goods this year. That will surpass the previous high of $872 million in 2017… which corresponded with bitcoin’s run up to $20,000 in price.

But guess what? $1 billion in a year is next to nothing in the big picture.

There’s a widespread perception that bitcoin is primarily used for illicit purposes. But nothing could be further from the truth.

For one, $30 billion worth of bitcoins trade on legal digital-asset exchanges every day. And remember, these exchanges verify the identities of all users.

So that’s 30 times more legal bitcoin activity in a single day than illegal bitcoin activity in a year.

But even more importantly, a report from Global Financial Integrity estimates that up to $652 billion is spent on drugs every year. What’s more, up to $1.1 trillion is spent on counterfeit and pirated goods.

Those transactions are in fiat currency… with U.S. dollars making up the biggest portion.

That means bitcoin is used in just 0.15% of illegal drug transactions each year. And if we include counterfeit goods, bitcoin is used in less than 0.06% of all illicit transactions. It’s a drop in the bucket.

I suspect we would see a similar pattern with Facebook’s Libra.

So if the concern over Libra isn’t about money laundering, what is it about?

I think I know…

New Reserve Currency

Like I said, Facebook has a user base of 2.7 billion people. That’s roughly 35% of the global population.

With 2.7 billion people connected to its network, Libra would certainly gain immediate adoption. That would create a multibillion-dollar business for Facebook overnight, thanks to transaction fees.

But it would also accomplish something else.

Read More @ CaseyResearch.com