Cryptocurrency’s quest for legitimacy just took a major step backward, but also one step forward.
The digital currency was prominently featured in a huge pump-and-dump scheme involving Walmart Inc. on Monday. Walmart and Litecoin (a lesser-known crypto cousin to Bitcoin) allegedly announced a collaboration. The world’s largest retailer will begin accepting digital currency as payment on its e-commerce platforms. This is according to a press statement sent by GlobeNewswire. This turned out to be a hoax, and Walmart soon disproved it. The Litecoin Foundation has also said that it will not be collaborating with the merchant. The exact circumstances around how and why this information was made public remain unknown. In any case, the episode will only serve to reinforce the idea that bitcoin is at best a toy for speculators and at worst a hotbed of criminality.
Crypto: a risky payout scheme for groceries
When the false news release reached the wire, Walmart’s stock climbed by less than 1%. Litecoin, on the other hand, has risen by as much as 33%. The culprits would have had to gamble on Litecoin or another cryptocurrency, some of which climbed in sympathy, for the scheme to payout. To summarize, digital currencies aren’t now a viable payment option for toilet paper, cereal, or other household commodities purchased at Walmart. Criminals, on the other hand, may find them handy.
In the financial markets, cryptocurrencies are still a bit of a wild west. One of the putative selling features is the lack of centralized, coordinated regulation. However, this also makes the market more prone to violent price fluctuations and makes fraudulent behavior substantially more difficult to identify than equivalent schemes in established financial products. The Securities and Exchange Commission, as well as prominent legislators, have been progressively advocating for tighter cryptocurrency regulation. They now have still another cause, thanks to the Walmart incident.
Extra cautions to digital currencies
Within minutes of the false press release reaching the wires, major financial news organizations like CNBC, Bloomberg News, and Reuters carried stories on the supposed Walmart-Litecoin alliance. This is a setback for the media, as well as a reminder to everyone to be extra cautious when dealing with digital currency. In retrospect, the press release had several clear red flags. For starters, Litecoin would be an unusual pick for a large shop. Litecoin is discovered in 2011. It lacks the liquidity and technological underpinnings of some of its more well-known competitors. Litecoin is the 15th-largest cryptocurrency, according to CoinMarketCap. It has only $12 billion worth of coins in circulation. Bitcoin, the market leader, has a total market value of almost $800 billion.
On the other side, these news organizations do not employ newcomers. For journalists to be prepared to push the submit button. There has to be some semblance of believability in the concept that a large shop may start taking cryptocurrencies as payment. For example, I doubt a bogus press release announcing Walmart’s acquisition of Amazon.com Inc. — a firm with a market value more than four times that of Walmart — would have obtained the same buy-in or generated the same shockwaves.
Walmart, for example, has exhibited an interest in cryptocurrencies; only last month, the business advertised a job opening for a blockchain strategist. Amazon has stated that it is investigating the usage of cryptocurrencies by its customers on its vast e-commerce platform. However, there are no imminent or specific plans to accept digital currency as payment. Tesla Inc. reportedly considered accepting Bitcoin as payment for its vehicles, but then changed its mind. Cites environmental worries over digital currency mining.
Digital currencies still have a long way to go before they become commonplace. Apart from the issues about corruption and fraud, it’s unclear if crypto can ever escape its Monopoly Money reputation and achieve widespread adoption. El Salvador becomes the first country accepting Bitcoin as legal tender. The launch was marred by technical issues, public protests, and concerns about oversight for bad actors in a country with a history of graft. Bloomberg Opinion’s Lionel Laurent and Aaron Brown documents.
Whether you like it or not, crypto — and all it entails — is here to stay, and it’s not going away anytime soon. Buyer beware, as well as the reader.
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