Charlie Munger has said that the United States needs to follow in the footsteps of China and impose a ban on cryptocurrencies. The 99-year-old investor believes that the lack of a clear regulatory framework in the crypto market has resulted in investors in the space having a gambling mentality.
Charlie Munger calls for a ban on cryptocurrencies
In a publication by the Wall Street Journal, Munger noted that cryptocurrencies could not be classified as any financial asset because they were not currencies, commodities, or securities.
Munger has long criticized the cryptocurrency sector alongside veteran investors such as Warren Buffet and Ray Dalio. Shortly after Munger’s op-ed in the Wall Street Journal, Dalio also reiterated his criticism of the cryptocurrency sector, saying that cryptocurrencies had no relation to anything.
Munger likened crypto investments to gambling, saying that nearly all the money invested in the industry went to the project creators. He also added that the United States needed to come up with a federal law that prevented crypto investments.
“It’s a gambling contract with a nearly 100% edge for the house, entered into in a country where gambling contracts are traditionally regulated only by states that compete in laxity. Obviously the US should now enact a federal law that prevents this from happening,” Munger said.
Munger referred to the issuance of thousands of new cryptocurrencies. The crypto market currently has more than 10,000 cryptocurrencies that are publicly traded without approval from regulatory bodies. Munger added that most of these cryptocurrencies do not come with disclosures on ways to protect the investors.
He also addressed the kind of marketing that happens in the cryptocurrency sector. He noted that these tokens are usually sold to a promoter for a small value. Still, the public later buys the tokens at a higher price without understanding the token’s value was compromised after the promoter was given many free tokens.
Munger has also recommended ways that the US can regulate the crypto market. He referred to China’s ban on cryptocurrency transactions in 2021. He also recommended that the US adopt a ban that was put in place by the English Parliament in the early 1700s banning new common stocks. The ban lasted for around a century.
Munger’s remarks come amid a bear market
The remarks made by Munger come as the crypto industry faces a wide range of issues that have affected crypto prices. A liquidity crunch has faced the sector triggered by the collapse of several players in the cryptocurrency industry, such as FTX, Three Arrows Capital, and Celsius.
The bear market that rocked the cryptocurrency industry in 2022 led to the market losing nearly $2 trillion in value. The price of Bitcoin plunged by nearly two-thirds, but it has recorded a healthy recovery this year. Bitcoin has been up by around 40% since the year started, and the global crypto market cap is also up above $1 trillion.
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Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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