Berkshire Hathaway's Vice Chairman said the U.S. should follow the example of China, which "wisely" banned all cryptocurrencies.
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Charlie Munger still doesn't like crypto.
The Berkshire Hathaway Vice Chairman's latest salvo came in a Wall Street Journal op-ed on Thursday in which he praised Chinese President Xi Jinping's "wise" economic policy — seven words you don't really expect to see in that order — for banning cryptocurrencies altogether and suggested the U.S. should do the same. And then, he said, we should:
"Thank the Chinese communist leader for his splendid example of uncommon sense."
Munger also cited a quote about mining attributed to Mark Twain that "a mine is a hole in the ground with a liar on top" and blamed the "wretched excess" of crypto promoters on "a gap in regulation." He added:
"A cryptocurrency is not a currency, not a commodity, and not a security. Instead, 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."
Crypto supporters, of course, offered plenty of pushback on Twitter Thursday. The best came from RealVision Senior Host and Crypto Editor Ash Bennington, who tweeted:
"I've always been a huge fan of Charlie Munger — but why does he want to be Crypto Voldemort on this?
Security Wanted
But beyond his call for a ban, Munger's point seemed to be that cryptocurrencies — if it must exist — should be regulated like securities (despite his saying clearly they are not securities.)
Munger noted that they are "publicly traded without any governmental pre-approval of disclosures."
Ensuring stock promoters make those disclosures is a key part of the Securities Act of 1933 and Securities Exchange Act of 1934, which created the Securities and Exchange Commission (SEC). An agency that says virtually all cryptocurrencies are securities.
And the two comparisons Munger made both go in that direction.
Twain's quote was born out of his time as a young reporter in the gold and silver mining boom town of Virginia City. A main goal of those miners, Twain wrote in the semi-autobiographical Roughing It, was to sell shares in their mines, rather than actually digging metal out of the ground.
Munger then referred to England's reaction to the collapse of the South Sea Bubble — based on an incredibly poorly thought-out company with a worthless slave-trading monopoly — and the subsequent depression it caused: a ban, Munger said, on "all public trading in new common stocks."
Strong Words
Honestly, this op-ed is not at all the harshest thing Munger has said about crypto. He's called it "stupid [and] evil" as well as saying Bitcoin's "whole damn development is disgusting and contrary to the interests of civilization."
Back in 2018, Munger called Bitcoin "noxious poison" and the "craze" surrounding it "totally asinine."
Even many other crypto opponents don't go that far, although more than a few do. Among them Berkshire Chairman Warren Buffett, who last year said he wouldn't buy all the Bitcoin in existence for $25, and JPMorgan Chase CEO Jamie Dimon, who in January said "Bitcoin itself is a hyped up fraud. It's a pet rock."
On the other hand, Mad Money host Jim Cramer, who in December said he "would not touch crypto in a million years," called Munger "out of touch" about the technology underlying crypto earlier last year. As well as the reality that clients and investors want it.
ARK Invest CEO Cathie Wood also sang Bitcoin's praises on Thursday, although not in response to Munger's comments.
A day after reiterating her long-standing prediction that BTC will hit $1 million, Wood told Yahoo Finance:
"There's hyperinflation all over the world as their currencies have fallen apart … Those populations need a fallback — an insurance policy like Bitcoin. As do high-net-worth individuals who are worried their wealth will be confiscated."
