The value of a cryptocurrency isn’t confirmed by third parties, like governments, the way the U.S. Treasury guarantees the value of the dollar. Its value is recorded and verified at the time you buy or sell it on those blockchain ledgers, which are open for anyone to review.
Without government regulation, cryptocurrencies can fluctuate massively from day to day, and the digital mechanisms behind them are regularly hacked by cybercriminals. They’re particularly vulnerable to manipulation by fraudulent advertising and scam artists, which has put pressure on companies like Facebook and Google to take action.
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Facebook went first, in January, when it banned “ads that promote financial products and services that are frequently associated with misleading or deceptive promotional practices,” like initial coin offerings and cryptocurrency.
Tuesday, Google followed suit, saying it would also ban cryptocurrency-related ad content beginning in June.
“We don’t have a crystal ball to know where the future is going to go with cryptocurrencies, but we’ve seen enough consumer harm or potential for consumer harm that it’s an area that we want to approach with extreme caution,” Scott Spencer, the company’s director of sustainable ads, told CNBC.
Google’s news landed as the International Monetary Fund, or IMF — in a paper ominously titled “Addressing the Dark Side of the Crypto World” — called on governments to impose “regulatory technology and supervisory technology” to “help shut criminals out of the crypto world.”
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“The same reason crypto-assets — or what some people call crypto-currencies — are so appealing is also what makes them dangerous,” the agency wrote, citing the decentralization of networks that allow traders to remain anonymous.
“The result is a potentially major new vehicle for money laundering and the financing of terrorism,” it said. And correcting the problems will “require close international cooperation: under a “global” framework — words that are poison to many cryptocurrency investors.
Then, on Wednesday, Congress got into the act. At a hearing of the House Financial Services subcommittee on markets and securities, members and witnesses colorfully expressed deep skepticism.
Rep. Bill Huizenga, R-Mich., the subcommittee’s chairman, derided what he called the “crypto craze,” promising: “This panel, this Congress is not going to sit by idly with a lack of protection for investors.”
Rep. Brad Sherman, D-Calif., was even more blunt, declaring: “Cryptocurrencies are a crock.”
“They allow a few dozen men in my district to sit in their pajamas all day and tell their wives they’re going to be millionaires,” he said.
Comments like that are indicative of the haziness of many people’s grasp of cryptocurrencies. Some experts have endorsed John Oliver’s explanation Sunday night on “Last Week Tonight.” Warning: Oliver uses equally colorful language, but of a different, not-safe-for-work variety.