Don't worry about China meddling with bitcoin reserves

To the editor,

Alison Jimenez raised interesting points in her recent BankThink commentary (A strategic bitcoin reserve raises real national security concerns, January 22). Her concerns, though, are misplaced as they reflect a widespread, but fundamental misunderstanding of bitcoin and other cryptocurrencies. Such currencies, if they can even be called that, are not backed by real financial assets — they are merely data entries in electronic bookkeeping systems.

Importantly, unlike SEC-regulated money-market mutual funds, the issuers of bitcoin and its ilk have absolutely no legal claim on any genuine financial assets, such as Treasury securities, highly rated corporate debt or fully insured deposits in federally insured banks. Therefore, the owners of bitcoin and other cryptocurrencies do not have a claim on anything of substance or value.

So-called stablecoins supposedly have such backing, ensuring that a stablecoin will always be redeemable in U.S. dollars for the full stated value of the stablecoin. In this regard, stablecoins are merely a variant of the classic money-market mutual fund, again assuming that the assets backing the stablecoin actually exist.

Put another way, there is no non-stablecoin crypto. Put yet another way, these cryptos have absolutely no substance, in the form of tangible assets or taxpayer backing — they are merely entries in an electronic bookkeeping system; electronic hot air, if you will, and nothing more. Therefore, the notion of creating a "strategic bitcoin reserve stockpile" is fundamentally absurd!

Let the Chinese meddle and hack away at non-stablecoin crypto — the economic impact of doing so will be zero, except for a lot of wasted effort by the Chinese.