In recent years, private companies large and small in the United States have issued thousands of new cryptocurrencies. It is then released to the public without prior government approval for publication.
In some cases, a large block of cryptocurrency has been sold to a promoter without a price, then the public buys it at a higher price without fully understanding the promoter's anticipated softening.
All this unbridled and mystical capitalism resembles what is described in the commentary attributed to Mark Twain, who said that "a mine is a hole lying in the ground".
These heinous violations happened because of loopholes in the rules. Cryptocurrency is not a currency, commodity or security. Rather, it is a gambling contract enjoying an almost 100% advantage in a country where gambling contracts have traditionally only been regulated by moderately competitive countries. Clearly, the United States must now pass new federal legislation to prevent this from happening.
Two interesting precedents can point us in the right direction of action. First of all, the Chinese communist government recently banned cryptocurrencies because it wisely concluded that they would do more harm than good. In the second example, England in the early 1700s reacted to a terrible recession by blowing up a campaign plan to make huge profits by using slow sailing ships to trade with the poorest across the world. world.
What the English Parliament did to quell this frenzied campaign was plain and simple: it banned all open trading in new ordinary shares, a ban that remained in place for almost 100 years. And in those 100 years, England made the greatest national contribution to the development of civilization, as it pioneered both the Enlightenment and the Industrial Revolution, and created a promising little country called the United States. -United of America.
What should the US do after the cryptocurrency ban? Well, another step might make sense: to thank the Chinese communist leader for a wonderful example of extraordinary wisdom.
Mr. Munger is the Vice Chairman of Berkshire Hathaway.
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It was released in print on February 2, 2023.