Cryptocurrency is already undergoing turbulence, but recent events involving Elon Musk and China suggest that its future may be completely altered.
Since Bitcoin and cryptocurrency gained prominence in the public consciousness in 2017, the debate over whether and how to regulate the cryptocurrency space has remained a source of contention.
Since the pandemic began, every few months, one country or another has banned or restricted cryptocurrency ownership or transactions.
Until recently, this drive was largely confined to the developing world, with India and Turkey leading the charge.
Then, in February, the winds of Western government regulation and intervention in the cryptocurrency space shifted dramatically.
US Treasury Secretary Janet Yellen spoke at a roundtable event about the “explosion of risk” caused by criminals and other nefarious individuals utilizing digital technologies.
Yellen continued by identifying cryptocurrency as a particular source of concern for the US government. While cryptocurrencies “had promise,” they were frequently used for criminal purposes such as “fraud, money laundering, and terrorist financing,” the report stated.
While crypto has frequently been associated with these types of actions by its critics, Yellen’s remarks were widely regarded as a watershed moment in the US government’s attitude toward cryptocurrencies.
In the months since, speculation has grown that a major push to regulate the crypto space is imminent. This could bring cryptocurrency ownership and transactions under the jurisdiction of governments, law enforcement agencies, and tax authorities.
Some in the crypto space welcome increased government oversight and regulation, believing that it will add another layer of legitimacy and security to a store of value and mode of transaction that is still widely regarded as a wild west.
Cyberattack on a colonial power
While crypto has long been in the crosshairs of government authorities and law enforcement worldwide, a series of events over the last few weeks have reignited efforts to regulate it.
On May 9, a major cyberattack by a Russian hacking group calling itself Darkside targeted the Colonial gasoline, diesel, and aviation fuel pipeline in the United States.
The Colonial pipeline spans the United States of America from Lindon, New Jersey in the northeast to Houston, Texas on the Gulf coast, supplying fuel to tens of millions of Americans.
Darkside demanded $5 million in cryptocurrency in exchange for the return of Colonial’s over 100 gigabytes of data.
The pipeline was shut down for days as a result of the cyberattack, affecting approximately 12,000 petrol stations across large swaths of the United States.
Fuel shortages persisted into the following weekend in some cities, with over 80% of gas stations reporting that they were out of fuel.
While the most significant takeaway from Darkside’s cyberattack is that the US infrastructure is vulnerable to new forms of warfare and crime, it has also added fuel to the fire for increased government regulation and transparency.
Only a few days later, another cyberattack targeted the Irish health system’s information technology infrastructure. As a result, the system had to be shut down, wreaking havoc on health services throughout Ireland.
Their systems were disrupted for three days, until they were targeted again in a second cyberattack.
As these ransomware attacks become more frequent and brazen, the cryptocurrency-based ransom method will almost certainly result in a push for much tighter government regulation of cryptocurrency transactions.
Elon Musk Gives and Elon Musk Takes
Elon Musk, founder of Tesla and billionaire cult figure, has made a slew of headlines in the cryptocurrency world in recent months. When Tesla announced in February that it would accept Bitcoin as payment for its vehicles, the price of Bitcoin skyrocketed.
However, the crypto community has discovered the hard way in recent weeks that what Elon Musk can give through his support can also be taken away almost as quickly.
Everything changed abruptly when Musk announced that Tesla would no longer accept Bitcoin as a method of payment for their vehicles.
On the day of the announcement, Bitcoin fell by as much as 15.5 percent (over $9000 USD), arguably initiating the crypto market’s current bear market. Prices have fallen to their lowest levels in over three months.
China’s most recent cryptocurrency ban
This week, the Chinese government announced yet another setback for cryptocurrency, prohibiting financial institutions and payment companies from providing services for cryptocurrency transactions.
“Recently, cryptocurrency prices have soared and plummeted, and speculative trading has rebounded, jeopardizing the safety of people’s property and upsetting the normal economic and financial order,” Chinese regulators said in a statement.
Their statement emphasized the high risk associated with cryptocurrency trading and the fact that it is “not backed by real value,” noting that their prices are easily manipulated and trading is not protected under Chinese law.
Beijing’s latest action was arguably another factor in Bitcoin’s recent price declines, with the cryptocurrency falling below $39,000 USD per coin for the first time since early February this week.