Weeks ago, Moe Vela was saying that cryptocurrencies, contrary to the claims of many cryptocurrency enthusiasts, were not a valid hedge against inflation. Recent events have served to prove him right.
In fact, Vela is a believer in cryptocurrencies. The former high councilor of the Clinton and Obama administrations is the transparency manager of the holding Transparent business and co-founder of Unicointhe official virtual currency of Unicorn hunters TV show. Unicoin is touted as “a dividend paying currency, backed by a growing portfolio of holdings in growing emerging companies.”
This statement sets it apart from popular cryptocurrencies like Bitcoin, which have emerged primarily as high-risk investment vehicles with no solid underlying assets. But Vela also distanced himself from the cryptocurrency gospel by warning that major cryptocurrencies are not a safe hedge in inflationary times.
Which turns out to be now. After years of low inflation, soaring prices and shrinking currency values are once again lifting their heads, propelled by rising energy prices and supply chain blockages which in turn have been triggered by the COVID-19 pandemic and Russia’s war against Ukraine.
Vela pointed out at the outset that cryptocurrencies, which have taken off in the last decade, have never been tested in an inflationary economy. And the return of inflation now proves that they are not immune. Bitcoin, for example, has lost half of its value in the past six months. Also many so-called stable coinspegged to the value of currencies, commodities or other types of traditional financial instruments, they fell below the benchmarks that should have supported them.
The problem, says Vela, is that the same concepts that make the cryptocurrency market so attractive to buyers – anonymity and decentralization – also come with risks and drawbacks. “We don’t know who owns these things, who is trading, who is trading,” she says. And this opens the door to the “nefarious” use of cryptocurrencies for activities such as drug dealing, ransomware attacks, avoiding economic sanctions and other illegal transactions on the dark web. At the same time, the cryptocurrency appears to be just as vulnerable to the inflationary pressures of sovereign currencies.
Vela believes it is a mistake to advertise anonymity as a selling point for cryptocurrencies. On the contrary, he says, it should be centralized and transparent, at least in the private sector. And this is the presumption behind Unicoin, of which 25 billion will be minted. The money generated from the purchases of the coin will be used to create a “global innovation fund” that acquires stakes in growing emerging companies, says Vela. “You as a buyer will always be able to see where your investment has gone.”
As the buyer is known, Vela argues, an asset-backed cryptocurrency is less volatile or prone to inflationary changes. It is also not afraid to advertise the coin as a security, subject to regulation by the US Securities and Exchange Commission. (SEC has been looking for a number of virtual coin offerings for alleged fraud and attempts to circumvent the designation of “safety” as a means of avoiding regulation.)
Vela says he is “not afraid” of the SEC regulations developed under President Biden Executive order on guaranteeing responsible development of digital resources. Unicoin “will be securitized,” she says. “We will fill in all regulatory requirements.”
He sees the shift to cryptocurrency regulation as inevitable, despite protests from cryptocurrency advocates. “After two White House tenures and being a public policy regulation attorney, I find it absolutely surprising and naively overwhelming that someone may have thought they were engaging in a digital currency that has never been regulated or taxed,” he says.
“At the end of the day,” adds Vela, “a certain amount of regulation is healthy. Where I draw the line is over-regulation. Call me in two years, if the SEC and the administration become [over-regulatory] when it comes to digital currency, I’ll be the first to criticize. “
The final verdict on cryptocurrencies has yet to be written. While Unicoin relies on ethical business practices, the initial issuer has no say in who might end up owning the currency in the future. And the declining value of cryptocurrencies across the board is undermining claims that they will eventually become a stable investment vehicle, not to mention an alternative means of payment and refuge from the ups and downs of traditional currencies.
Unicoin will need some time to demonstrate its feasibility. It won’t begin minting until 2023, even if the presale has been oversubscribed within 72 hours, says Vela.
Count Vela as a cheerleader of the concept, albeit with reservations about the Wild West appearance of some coins. “I believe cryptocurrencies are here to stay,” she says. “It’s the next generation of currency. There is no doubt about this in my mind. “