Governments Crack Down on Cryptocurrencies

A rapid-fire set of announcements looks to me like a coordinated squeeze on cryptocurrency investments by governments who feel threatened.

After hitting $20,000 in mid-December, bitcoin prices keep drifting lower.

Looking at the news, it’s clear to me why this is happening.

On Monday, the Financial Industry Regulatory Authority (FINRA), the organization that regulates brokers, advisers and financial institutions in the United States, announced that it was going to focus on cryptocurrencies.

FINRA is a big deal if you manage money or if you are a financial adviser … you have to follow its rules and subject yourself to its examinations.

Merrill Lynch, one of the biggest financial broker and advisory companies in the U.S., banned any cryptocurrency investments in its accounts.


The Chinese government this week announced a plan for an orderly end to bitcoin mining.

That’s right after Visa Europe canceled cards that allowed users to access bitcoin.

This comes right after the South Korean government started requiring real names for all cryptocurrency transactions. The government also banned banks from opening accounts for virtual currencies.

The Indian government is waging war on bitcoin and cryptocurrencies by choking the flow of cash to anyone who’s trading these assets.

If you’ve been in markets long enough, you can see a familiar pattern here…

Putting the Squeeze on Cryptocurrency Investments

This rapid-fire set of announcements looks to me like a coordinated squeeze on cryptocurrency investments. And it reminds me of a similar squeeze that I personally experienced before where I lost money.

PartyGaming. Sportingbet. PokerStars. 888 Holdings. You’ve never heard of these companies, even though they were once highfliers in online gambling through poker.

The thing is, online gambling is illegal in the United States. And most of their customers were U.S. citizens.

These companies skirted around U.S. law by operating their websites from places like Costa Rica, the Caribbean and the United Kingdom. For a while, the U.S. government tolerated this activity.

Then, on October 2, 2006, the government lowered the hammer.

It secretly added rules into a transportation law called the SAFE Port Act. These rules made it illegal for American banks and credit card companies to process payments to online gaming companies.

By doing this the government chopped off the lifeblood of these businesses — money flow.

You see, everyone gambling online used credit cards or bank transfers to fund their betting. If you made it illegal to process transfers to online gambling companies, you starved these companies of their source of cash.

Overnight, 90% of their sales disappeared. Instantly their stocks crashed. They never recovered.

A Big Threat to Government Power

So here’s why this matters to bitcoin and cryptocurrencies.

I believe that governments are looking to crack down on bitcoin and cryptocurrencies because they see them as a threat to their monopoly power to issue currency.

Governments around the world derive great power from their ability to issue their national currency. It’s completely against their interests to have a new currency compete with their monopoly in issuing currency.

The fact that people are using bitcoin and cryptocurrencies to transfer wealth, avoid taxes and for illegal activities is also a big threat to government power.

If everyone shifted to bitcoin or cryptocurrencies, then the government’s tax collection would go to zero. And it could lose its ability to enforce law and control the economy.

The bottom line: Bitcoin and cryptocurrencies represent a threat to a government’s power.

Cutting off the Money Flow

The U.S. China. South Korea. Europe. India. These are substantial markets for bitcoin and cryptocurrencies.

These governments know banning bitcoin and cryptocurrencies can cause social and political unrest. Instead, they are going to squeeze them dry using the same technique they used to get the online gaming companies: They are going to starve the cryptocurrency exchanges of money flow.

Cutting off the money flow from new clients and cash will slowly dry up the trading and liquidity in bitcoin and cryptocurrencies. The government will keep squeezing until these markets are no longer a threat to them.

Now, those who own bitcoin and other cryptocurrency investments are going to dismiss this threat. They believe that bitcoin and cryptocurrencies are going to stay strong even as governments put the squeeze on these assets.

I believe they are wrong. And my experience with online gambling stocks is just one example of how harshly governments will act when their powers are threatened.


Paul Mampilly

Editor, Profits Unlimited

  • Harold Decker

    I believe that the crypto companies will open their own banks. These will also be out there with the coins. They will have a clearing house some where the government can’t get to it. If you have millions involved a little trip to Timbuctoo won’t be so bad.

  • alaskat

    I agree with Paul on cryptos, governments are fiercely protective of their power. Like a mama grizzly bear they’ll do whatever is necessary to protect it. Absolutely. I don’t believe governments will tolerate crypto currencies because we are moving in the direction of one world government as described in the Bible’s last book, Revelation. One world government, in order to be in complete control of everything, must be a dictatorship, and not necessarily a kind one.

  • joe4liberty

    Maybe, but I doubt it. Not saying that it’s not possible, but it isn’t as easy as that, and the costs of keeping yourself from being ruined or killed will be very high. Most never thought that the US government would successfully convince EVERY nation on earth to file reports to the IRS, but in less than two years, EVERY nation now either plays ball and files those reports – due to FATCA – or simply refuses American bank accounts so that there are no reports to file. It’s a bit simplistic to think that someone is going to publicly take on the US for a few hundred million dollars. You aren’t talking black-market where you can keep everything hidden, you are talking about opening a bank – and then openly flouting US law. What country is going to be willing to go to war with the US so that you can open said bank?
    Remember Mr. Hussein and Mr. Gadhafi both saw the injustice in the petrodollar scheme and decided to trade oil without first kissing Uncle Sam’s ring and buying those U S Dollars… look at what happened to them. If they couldn’t do it, good luck opening your bank – the U.S. Dollar has too many VERY powerful friends..

  • Kingdom Business

    The powers that be will create their own coin after destroying the current market. Bitcoin is completely unregulated. Not to mention regular people who would have never had money in their corrupt system now have hundreds of thousands of dollars and some are becoming millionaires. This threatens their control and plans to rule through bloodlines.

  • Harold Decker

    The barter system has always worked when nothing else is available. I will trade my whatever for your gizmo.

  • Herb

    Let’s put on our brain storm gear here. Are there other value exchange systems where other forms of currency do not threaten governments but need the convenience of its very nature which fr the most part is SPIRITUAL representing the human production as assets and capital? What happens when the traditional institutions fail or they create their own cryptocracy and offer better “ROR’s?

  • Debbie Ayton

    It’s billions, not millions and if all the Crypto companies/holders got together now their market share is definitely substantial enough to challenge old US of A. Which is the whole point of the exercise in the first place. Take away the power of elitist government.


    Not all countries have gone along with the IRS there are those that told them to get messed in there mind and to leave there country The U.S is not all what you think it is. Wake up. There are many that laugh at the its dumpiness of the US.. It does not even have a real Central Bank, so what does that say for the U.S. not much. We owe $20 trillion and do not know how to stop spending. next please.

  • Why no mention of Japan & Australia making them legal currency in their respective countries?

  • We will just move to Japan like Roger Ver and now Japan will become the richest country, you really think other countries are going to let that happen, NO….As long as you have a few countries that accept Bitcoin as a currency, other countries will have to follow or the wealth will go to the few countries that accept Bitcoin, this is by far the greatest transfer of wealth, soon to be the greatest transfer of the Richest Country if the U.S. keeps it up…..

  • Valerie Collins

    Squeezing the cryptocurrencies dry is an underhanded, backdoor strategy, demonstrating yet another technique employed by those same entities that brought the world’s economy to its knees in the great short! It should be expected that these same shady characters, motivated by unending desire for unlimited power and control, are positioning to do whatever it takes to maintain their monopoly power. This very behavior (mindset) is what lead to the development of cryptocurrencies in the first place. In a free market system, competition is healthy because it maintains balance. Underhanded business practices, aimed at eliminating competition in order to maintain centralized power and control, ensure that only the plutocracy benefits and this reeks of both antitrust violations and totalitarian practices. There is absolutely no question, we live in times of great disruption, with dysfunctional systems unraveling everywhere we turn. Dismantling the power base of the patriarchal, imperialist, capitalist and let’s not forget – misogynist worldview is beginning to unfold. The rise of cryptocurrencies is one of the hopeful examples that mankind may actually be sustainable, afterall…

  • jazim nawaz

    FINRA saying that it would focus on cryptocurrencies does not necessarily mean that they are going to outrightly ban them. It may as well be an attempt at regulating the crypto markets or bringing them under regulations, in sync with financial markets. Whether they can do that, is another matter. Moreover what about cryptos that have intrinsic value owing to their algorithms and have real life application in banks, value chain industry etc etc. Embrace the future or attempt to kill it. If it survives governments onslaught, it will only emerge much stronger. Fingers crossed….

  • Jonathan Joy-Pagliarulo

    If you think the United States is broke then you need to wake up. Every wealthy person and successful business owner shows a loss at the end of the year so they don’t have to pay taxes or in the case of our country, so we don’t have to pay the UN to spend our money supporting third world countries and to fund projects for The W.H.O. And for global warming all these things that we would rather not pay for and keep for ourselves and unfortunately I do agree that our selves is compiled of mostly the rich and Powerful cabals who really run the show here in the United States who just like to up appear broke. Haven’t you ever met a rich person before? They are classy and all but not always and very cheap, and act like they need your money and like you are wealthier than them. Very grow thrives off of the deception making themselves feel secure bye attempting to flaunt insecurities before inferior beings because they are greedy and just want to take and take even from those you have nothing to give, they will take your soul if you let them. The United States of America, as much as I love my country, is no different. They just don’t want anybody to know what cards they are holding. any country that can carry and 20 trillion-dollar credit card and not have to worry about bankruptcy definitely has an ace up their sleeve. Don’t be naive or believe what you were hear, just always remember the type of people who are running our country are the same type of people Drive around in a limo but will not give you a tip, except for telling you to tuck your shirt in cuz you look like a bum.

  • It’s too late. The cat is out of the bag. There is no way to stop crypto’s. Decentralized exchanges will explode worldwide when government tries to increase regulation. It is the beginning of the end for the central banks.

  • disqus_G41u9lMdUe

    What I find interesting though is IoT… There are cryptos that are 100% attached to the Internet of Things… namely IOTA tokens. So which is it?…. All cryptos will fail, or will they be needed for the next technological revolution coming? Paul doesn’t mention that. If IoT succeeds, then it will be mandatory for cryptocurrencies like IOTA to succeed. Can’t have one without the other. Also, not sure if anyone else actually READ the FINRA announcement, but all they said is this….

    [Initial Coin Offerings and Cryptocurrencies – “Digital assets (such as cryptocurrencies) and initial coin offerings (ICOs) have received significant media, public and regulatory attention in the past year.6 FINRA will closely monitor developments in this area, including the role firms and registered representatives may play in effecting transactions in such assets and ICOs. Where such assets are securities or where an ICO involves the offer and sale of securities, FINRA may review the mechanisms—for example, supervisory, compliance and operational infrastructure— firms have put in place to ensure compliance with relevant federal securities laws and regulations and FINRA rules.”]….

    This just tells me that they are going to REGULATE to the exchanges… not wipe them out. Many hedge funds DEPEND on Bitcoin and other cryptocurrencies.

  • Harold Decker

    I was not up to date when I answered these comments. There is an internet and crypto coin bank. It is called Mistertango Bank. It is formed under European rules and the bank has its on coin that is always worth 1 euro, Therefore it can be stored without ever worrying about a loss in value. It also offers a credit card.

  • tony

    This article is utterly inane and inaccurate. The author does not understand the technology or the merit and is looking at Bitcoin and other crypto’s as currencies. They are not currencies. FINRA regulates the brokers and sellers of securities. Wall Street is gong on block-chain technology within 5 years and FINRA will no longer be needed to regulate the market because the block-chain technology can do that on its own. Every major bank in the West is adopting block-chain technology except PNC and Chase. ALl these banks belong to the R3 block-chain developers consortium. VISA/Mastercard are piloting a block-chain product as I write this. What a lot of people miss is that its the technology that Bitcoin sits on, not the “currency.” These folks can’t see beyond the current paradigm-and it’s already shifted. The clunky old banking system is being overhauled by block-chain applications. Lastly, two-thirds of the developing world do not have ATM’s on every corner, nor any banks at all. But theor people all have access to and use smart phones. Their banking systems will be on the block-chain and its coming fast because it’s inexpensive and can provide a financial infrastructure for trade without waiting for corrupt governments to manipulate and control. Economic development is where the rubber meets the road for advanced market economies. They need the economic development to continue to expand to have even broader growing markets. Block-chain technology is a massive game changer that offers a quick and reliable solution. There were those who warned against buying Apple in 1996, Amazon in 1994, Microsoft in 1987, Facebook in 2001. Block-chain technology is bigger than all of these combined.

  • Valerie DuVall

    Finally a voice of reason with actual facts!! I don’t think most people – even most crypto traders – get what is happening!

  • jrj90620

    I still remember,in the late 1970’s,when the Hunt Brothers were buying tons of silver,driving the price to $50 an ounce.Along comes govt,changing the rules for commodity margin requirements,killing the silver bull and producing huge losses for the Hunts.I expect they aren’t going to allow crytos to upset their currency monopoly.The smart money is selling crytos as fast as they can.

  • jrj90620

    Gold has served much longer than any other currency as the world money of choice.We don’t need cryptos,when there is gold.

  • Brandon Schwartz

    Well said sir. What the government needs to put in place are regulations (similar to banks) on the crypto exchanges. Simply require that they get confirmation of the traders identity and report their capital gains to the IRS. That solves the problem of laundering and makes sure everyone is paying their taxes. It also leave the crypto market place intact. The whole point of the new decentralized internet that is being spawned from the rise of these crypto assets and smart contracts is that it is SELF REGULATING. The sooner the federal government can put those regulations on the exchanges the better. I think that will give cryptos all they need to be considered a legitimate investment and open the flood gates of innovation.

    The white pages of Filecoin explain the internet revolution very well:

    “The internet is in the middle of a revolution: centralized proprietary services are being replaced with decentralized open ones; trusted parties replaced with verifiable computation; brittle location addresses replaced with resilient content addresses; inefficient monolithic services replaced with peer-to-peer algo- rithmic markets. Bitcoin, Ethereum, and other blockchain networks have proven the utility of decen- tralized transaction ledgers.”

  • lukeskyrunner

    I salute you sir. Gartner estimated 25 Trillion USD moving onto blockchain Technologies within the next few years. But I’m not sure if there is the hodling amount of individuals and companies already included. Maybe only what will be transferred between B2B and B2C every day or week or month.

  • lukeskyrunner

    For developing countries Cardano could be the way to bank the unbanked. Or beside of Cardano OmiseGo is also a promising solution. Cheers.