White House Crypto “Roadmap” Advises Against Pension Funds. At the end of this past month of January, the White House released a statement in which it provided the administration of the president of the United States, Joe Biden, with a road map to mitigate the risks associated with cryptocurrencies. The administration’s legislative guide directed much of the document to the US Congress. What are the implications of this?
The important thing here is to understand what we are talking about when we talk about risk. First of all, the word “risk” is not a bad word. That is, it is not an attack. There is no conspiracy theory trying to discredit cryptocurrencies using the word risk. Risk is everywhere. Every investment involves risk. And the responsible thing to do is to present those risks as candidly as possible. The investor must have all the information to be able to manage and cover that risk. It’s not the end of the world.
The concept of risk is closely linked to the concept of uncertainty.. Suppose our main concern is our health. No one in their right mind wants to get sick. However, we well know that the risk does exist. An unexpected health problem entails a series of expenses that are very difficult to budget for. What health problem? We do not know. This uncertainty also represents a financial problem. We can leave everything to the good of God. EITHER we can organize ourselves to face the situation strategically.
What can we do? How to mitigate this risk? Well, we can take care of our health in the best possible way. We can try to avoid dangerous activities. And we can have faith in our good luck. Additionally, it would be sensible to maintain an emergency fund. And we could also sign a contract with an insurer to cover the financial risk of our possible health problems. In this way, we would be managing the risk. In general, risks are unavoidable. So it’s not a bad idea to be prepared.
There is talk of risk not to instill fear. There is talk of risk, because in this matter you have to be as clear as possible. The idea is to manage risk to reduce uncertainty. Now suppose we have expenses and debts. Let’s say we have a mortgage to pay and certain monthly expenses. Suddenly, we are out of work. And the savings? And the investments?
In this case, the volatility of an asset’s price is (practically) synonymous with risk. Because? Many people require a fixed income, because their expenses are fixed. In fact, as a general rule, the investor becomes more conservative with age. In other words, stability and security are preferred as retirement approaches. An investment portfolio that needs to generate fixed income to pay for one person’s monthly expenses cannot afford to fluctuate too much.. Here growth takes a backseat. And stability and predictability gain in importance.
In other words, Bitcoin is not for everyone. My 94-year-old grandmother once asked me about BTC. Should I invest? No, grandma. It is best to focus on what is stable and what is safe. Here “safe” is not scarcity. It is not the libertarian utopia. Here what is certain is price stability, because a fixed income is required to cover expenses. My grandmother does not live by narratives. She does not live by ideologies. She does not live on chimeras. She lives on a fixed income (in dollars). Can she wait a year or two for the price to recover? No.
Of course, my grandmother’s situation is not unique. In fact, the population is aging. The baby boomer generation (who have a lot of money) is entering retirement age. And this will have an effect on the investment world. In matters of economics and finance, demographics matter. And it matters a lot.
In relation to pension funds, the emphasis is usually on stability and security. The risk is reduced to its minimum expression. That implies that the very new, the very experimental, and the very speculative are generally avoided. Pensions are administered very conservatively due to the type of participant. Any highly volatile asset in a pension fund is not always welcome. It could be said that it is not advisable.
Every administration presents itself as an advocate for the common people. In this particular case, the White House offers itself as a defender of retirees. The recommendation is to avoid the very risky in funds that require a lot of security. The approach is not entirely unreasonable.
In relation to this “road map”, the White House has many tasks for legislators. Their recommendations include expanding the powers of regulators, strengthening reporting requirements, toughening penalties for misconduct, increasing funding for law enforcement, and monitoring advice that They are listed in the Financial Stability Oversight Board report required by presidential order. Se seeks to protect the investor (of all ages).
According to the statement, government agencies are developing public awareness programs “to help consumers understand the risks of buying cryptocurrency”. That part is very important. Undoubtedly, the public must be very well informed of all the risks. We cannot let ideological passion lead us to irresponsibility. Yes there is risk.
“Legislation should not give conventional institutions, such as pension funds, the green light to jump headlong into cryptocurrency markets.”the authors of the statement wrote.
After the collapse of FTX, the Biden administration has been forced to act. Doing nothing is no longer an option. Because the public pressures the executive to act. They can’t seem forgiving. Million-dollar losses have many mourners. And, in this case, libertarian-style victim-blaming is not enough. That Spartan ethic of free-market fundamentalism isn’t for everyone. Most mortals demand amends and justice through state power. Whether we like it or not, these are the ways of today’s society.
Disclaimer: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information presented here should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
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