Last week, Senator Joe Manchin of West Virginia wrote to the heads of the Treasury, Federal Reserve, FDIC, SEC, CFTC and the Comptroller of Currency to demand a ban of Bitcoin, saying the virtual currency “has allowed users to participate in illicit activity, while also being highly unstable and disruptive to our economy.” Using almost identical arguments, another lawmaker has written the same regulators calling for an end to cash money.
“The exchange of dollar bills, including high denomination bills, is currently unregulated and has allowed users to participate in illicit activity, while also being highly subject to forgery, theft, and loss,” writes Colorado Congressman Jared Polis in his tongue-in-cheek letter [see full text below] to Treasury Secretary Jack Lew, Federal Reserve Chairwoman Janet Yellen, Comptroller of Currency Thomas Curry, Acting CFTC Chairman Mark Wetjen, FDIC Chairman Martin Gruenberg, and SEC Chairwoman Mary Jo White.
In the original Manchin letter, the Senator had claimed that the anonymity of Bitcoin make it attractive to “criminals who are able to disguise their actions from law enforcement… Anonymity combined with Bitcoin’s ability to finalize transactions quickly, makes it very difficult, if not impossible, to reverse fraudulent transactions.”
But Polis counters that “Dollar bills are present in nearly all major drug busts in the United States and many abroad,” pointing to the discovery of piles of cash found in the hands of international bad guys like Saddam Hussein and Manuel Noriega.
As for Manchin’s assertion that Bitcoin should be banned because hackers have been able to steal large amounts of the currency, Polis cites Justice Dept. stats showing that only about 3% of the $1 billion in stolen cash from 2012 was recovered.
“The clear use of dollar bills for transacting in illegal goods, anonymous transactions, tax fraud, and services or speculative gambling make me wary of their use,” concludes Polis. “Before the United States gets too far behind the curve on this important topic, I urge the regulators to work together, act quickly, and prohibit this dangerous currency from harming hard-working Americans.”
And here is the full text of the Polis letter:
March 5, 2014
Dear Secretary Lew, Chairwoman Yellen, Comptroller Curry, Acting Chairman Wetjen, Chairman Gruenberg, Chairwoman White:
I write today to express my concerns about United States dollar bills. The exchange of dollar bills, including high denomination bills, is currently unregulated and has allowed users to participate in illicit activity, while also being highly subject to forgery, theft, and loss. For the reasons outlined below, I urge regulators to take immediate and appropriate action to limit the use of dollar bills.
By way of background, a physical dollar bill is a printed version of a dollar note issued by the Federal Reserve and backed by the ephemeral “full faith and credit” of the United States. Dollar bills have gained notoriety in relation to illegal transactions; suitcases full of dollars used for illegal transactions were recently featured in popular movies such as American Hustle and Dallas Buyers Club, as well as the gangster classic, Scarface, among others. Dollar bills are present in nearly all major drug busts in the United States and many abroad. According to the U.S. Department of Justice study, “Crime in the United States,” more than $1 billion in cash was stolen in 2012, of which less than 3% was recovered. The United States’ Dollar was present by the truck load in Saddam Hussein’s compound, by the carload when Noriega was arrested for drug trafficking, and by the suitcase full in the Watergate case.
Unlike digital currencies, which are carbon neutral allowing us to breathe cleaner air, each dollar bill is manufactured from virgin materials like cotton and linen, which go through extensive treatment and processing. Last year, the Federal Reserve had to destroy $3 billion worth of $100 bills after a “printing error.” Certainly this cannot be the greenest currency.
Printed pieces of paper can fit in a person’s pocket and can be given to another person without any government oversight. Dollar bills are not only a store of value but also a method for transferring that value. This also means that dollar bills allow for anonymous and irreversible transactions.
The very features of dollar bills, such as anonymous transactions, have created ubiquitous uses from drug purchases, to hit men, to prostitutes, as dollar bills are attractive to criminals who are able to disguise their actions from law enforcement. Due to the dollar bills’ anonymity, the dollar bill market has been extremely susceptible to forgers, tax fraud, criminal cartels, and armed robbers stealing millions of dollars from their legitimate owners. Anonymity, combined with a dollar bills’ ability to finalize transactions quickly, makes it very difficult, if not impossible, to reverse fraudulent transactions.
Many of our foreign counterparts already understand the wide range of problems that physical currencies can have. Many physical currencies have enormous price fluctuations, and even experience deflation. 20 years ago Brazil had an inflation rate of 6281%. In 4 years (2001 to 2005), the Turkish Lira went from 1,650,000: $1 to 1.29 to $1. In 2009, Zimbabwe discontinued it’s dollar. Before it was eliminated, the Zimbabwe dollar was the least valuable currency in the world and their central bank even issued a $100 trillion dollar banknote. A person would starve on a billion Zimbabwe dollars and it took an entire wheelbarrow full of $100 billion dollars in notes to purchase a loaf of bread.
The clear use of dollar bills for transacting in illegal goods, anonymous transactions, tax fraud, and services or speculative gambling make me wary of their use. Before the United States gets too far behind the curve on this important topic, I urge the regulators to work together, act quickly, and prohibit this dangerous currency from harming hard-working Americans.
Member of Congress