Mark Haefele Warns of Potential Government Clampdowns on Crypto Assets in New Book
In an excerpt from The New Rules of Investing, UBS Global Chief Investment Officer Mark Haefele has sounded the alarm for cryptocurrency enthusiasts, suggesting that government intervention could spell disaster for the digital asset class if it threatens the existing financial order. Haefele’s book, co-authored with Richard C. Morais and set to be published on January 28, offers a sobering perspective on the future of crypto amidst growing government scrutiny.
“The notion that the global financial order could one day suffer or collapse under the weight of its debt has understandably given rise to a survivalist impulse to do whatever it takes to escape the financial system we have, and perhaps create a new system in the process,” Haefele writes. “That impulse, for good or bad, stands behind the rise of cryptocurrency, but I am highly doubtful that cryptocurrencies will save us.”
Governments worldwide perceive cryptocurrencies as both a challenge to the financial status quo and a facilitator of illicit activities, such as money laundering. Haefele highlights that regulatory bodies are keeping a watchful eye on the crypto market, noting that U.S. officials have frequently warned against the risks associated with digital assets. “The U.S. secretary of the treasury pointedly warned Americans against ‘extremely risky’ cryptocurrencies lacking ‘appropriate supervision and regulation,’” he states.
The approval of crypto-based exchange-traded funds (ETFs) has bolstered Bitcoin’s market position, pushing the digital asset closer to mainstream acceptance. However, Haefele remains skeptical about the long-term implications of such developments. “It’s not yet clear whether government will ultimately regulate cryptocurrencies into submission and make them part of the world financial order or whether cryptocurrencies will remain an alternative financial asset that rivals and threatens the status quo,” he cautions.
Drawing on historical examples, Haefele underscores the inevitability of government intervention in times of financial uncertainty. He recalls how, during the Great Depression, the U.S. government enacted measures to restrict private ownership of gold, fearing it posed a threat to the financial system. Similar actions were taken by Australia and the UK in subsequent decades. “The lengths to which the U.S. government went to save the financial system during the Global Financial Crisis… will be dissected at length,” he explains, emphasizing the enduring principle that governments will take extraordinary measures to preserve the status quo.
Despite the rapid growth of the cryptocurrency market—valued at $1.7 trillion by the end of 2023—Haefele asserts that its relative size compared to other asset classes makes it vulnerable to decisive government action. “Cryptocurrencies as an asset class remain so small that governments could quash them without a major disruption to global markets,” he argues.
Haefele warns investors against pinning their hopes on cryptocurrencies as a means of escaping the existing financial system. “Rather than trying to understand the existing system and learning how to invest accordingly, an increasing number of investors are thinking they can escape the prevailing system through cryptocurrencies—and are at heightened risk of losing their life savings in the process.”
The excerpt from The New Rules of Investing, published by HarperCollins Leadership, paints a grim picture for crypto enthusiasts. Haefele’s insights serve as a stark reminder that, in an era defined by government intervention, no asset class is immune to regulation.
