Pether (5)
Washington, D.C.
I met a man in the political heart of America.
A white man in his late forties, tall and handsome, with a presence that filled the room the moment he stepped into it.
He greeted me with an expression so openly delighted it was almost disarming.
"Welcome."
"It’s good to see you again, Senator."
His name was Mark Phillips.
He was currently a senator from Georgia.
Among the politicians I had met, he was the highest-ranking by far.
I had met Namgung Seok in Korea, of course, but a member of the National Assembly and a U.S. senator simply weren’t in the same class.
Korea had three hundred lawmakers. The United States had exactly one hundred senators for this vast country.
And on top of that, he was a leading Democratic presidential contender. Meeting someone like that was an extraordinary privilege.
"You must be busy with legislative work, so thank you for making time for me."
"Please. No matter how busy I am, I had to meet with Mr. Han."
"Please speak casually."
Senator Phillips laughed.
"Ha ha, all right. How have you been?"
"I’ve been working hard and investing."
"I heard you were going to start an investment firm that day, but I never imagined it would become Continue Capital. The growth has been astonishing. Everyone in Washington knows the name now."
He spoke as if he were looking back on it all.
"Even now, I still think about that day sometimes. What would have happened if Mr. Miru hadn’t been on the same plane? Just thinking about it is terrible."
"Yes, well…"
In truth, nothing would have happened even without me.
Still, there was no need to correct his misunderstanding.
Come to think of it, I wondered how Christopher Romu—the older gentleman who had been on that flight with me—was doing.
I had meant to call him at some point, but I’d forgotten.
"I met Chairman Yoo Jae-ho of Yuseong Group recently over the semiconductor plant issue. I heard that you were the one who recommended Georgia. Is that true?"
"Did Chairman Yoo say that?"
"Yes. When I asked him what made him change his mind at the last moment, he said it was thanks to advice from Continue Capital."
I hadn’t expected him to praise me like that.
The semiconductor plant, which had nearly gone to Texas, had instead turned toward Georgia, and his political footing had only grown more secure.
This year held a major event in both Korea and the United States: a presidential election.
The Republicans were a foregone conclusion, since incumbent President Johnny Wallace would win their primary anyway, so all attention was fixed on the Democratic race.
The leading candidate had originally been Illinois Governor Darren Kassel, but now Senator Mark Phillips’s approval ratings were steadily climbing.
Recent events played a role in that, too—especially the sharp rebuke he had delivered to Mike Goldenberg during the Facenote hearing.
After we talked about old times for a while, he finally asked me, "What brings you here today?"
I got to the point.
"Do you know about Pether?"
"You mean the stable coin?"
"Yes. I have something to tell you about it."
I handed him the materials and briefly explained what I had uncovered about Pether.
Senator Phillips frowned slightly.
"You’re saying there’s a problem with Pether’s reserves?"
"Yes. Pether’s issuance is worth as much as fifteen billion dollars, yet no accounting audit has ever been carried out. On top of that, we’ve found signs that it’s being used for all kinds of illegal activity."
"Illegal activity?"
I passed him the documents.
"Pether’s issuance volume and cryptocurrency market capitalization are closely linked. Every time Pether’s issuance expands, you can see Vantcoin’s price spike."
"You’re saying they’re manipulating prices through Pether?"
"Yes. When money floods the market, asset values rise. In addition, there are signs of wash trading designed to push Vantcoin up."
If the price was 10,000 won, I would list it at 11,000, buy it myself at that price, then list it again at 12,000 and buy it again, repeating the process.
That makes volume rise, creating the illusion that the price is climbing. Other buyers then pile in, and the effect becomes real.
If you got caught doing that in the stock market, it would be called a wash sale and you’d be dragged off immediately.
Yet astonishingly, in the cryptocurrency market, it hardly caused a stir.
"A stable coin is effectively a financial product. It should be subject to bank-level audits, but Pether has never undergone any audit at all, nor has it disclosed its assets. The authorities need to regulate this."
"How?"
"First, unbacked stable coins should be driven out of the market. Even if the issuer is Enple or Guble. Issuing stable coins on the strength of mere trust is no different from printing dollars. Second, stable coins must hold reserves equal to the amount they issue. Naturally, those reserves should be at least equal to the outstanding coins, if not greater. They must be clearly separated from the issuer’s own assets and held by a government-approved depository or custodian so they can’t be touched at will. In addition, the asset list must be specified clearly so the reserves don’t get wiped out through bad investments. For example, they should be held in short- and long-term U.S. Treasury securities and the like."
Senator Phillips studied the documents with a grave expression.
"Political circles have been watching cryptocurrency closely as well. There have been discussions about regulation for a long time."
If it were currency, they could regulate it like foreign exchange. If it were an asset, they could regulate it like stocks or real estate. But cryptocurrency sat somewhere in the middle.
While everyone kept their hands off it, the cryptocurrency market and the exchanges both exploded in size, until now they had grown too large to easily touch.
"But if you suddenly start regulating it and prices crash, investors will come down on you hard."
"That’s true."
That was the biggest reason authorities hesitated.
Something similar had actually happened in Korea a few years earlier.
Koreans had a peculiar love for cryptocurrency. Given the population, the number of investors wasn’t small, and per-capita investment amounts were no less than in many other countries.
The reason wasn’t some grand fascination with blockchain, the so-called jewel of the Fourth Industrial Revolution… not really. In practice, it was a gambling pit.
There was a chance to make a fortune overnight, so of course people were going to jump in.
At the time, Korean enthusiasm was so intense that a phenomenon called the Kimchi Premium emerged, with the same cryptocurrency trading more than 20 percent higher on won-denominated markets.
In other words, a coin that traded at 10,000 won in the U.S. would sell for 12,000 won in Korea.
You might think no sane person would buy at that price… but everyone bought anyway.
After all, the price was going to rise sooner or later. What did it matter if you paid more?
I remembered the first time Sun-woo and I invested in crypto together.
Looking back, it was already near the end of the run, but the mood at the time hadn’t been bad. We had made about 50 percent at the start.
We were shouting gajaaa with all our might when something unexpected happened.
At a press briefing, Justice Minister Kim Cheong-gi said, "Cryptocurrency trading is currently taking place in a manner similar to speculation and gambling. We are considering enacting legislation to ban cryptocurrency trading and shut down cryptocurrency exchanges."
The statement hit the entire world at once.
Vantcoin plunged 30 percent, and most altcoins dropped by more than 50 percent. Some collapsed by over 90 percent.
Then the Kimchi Premium vanished at the same time, making the shock to Korean investors even worse.
It had been profit the day before, and then suddenly you were staring at minus 70 percent by the next morning. It was enough to make your mind go blank.
I wasn’t the only one. Back then, crypto beginners were in outright collective panic.
As complaints from investors poured in and even the administration’s approval ratings began to show signs of slipping, the government quietly distanced itself and said it had merely been "a personal remark made without consultation among the relevant ministries."
But furious cryptocurrency investors called it the Kim Cheong-gi Rebellion and demanded the justice minister’s resignation, and even foreign media gave it splashy coverage.
After the Kim Cheong-gi Rebellion was suppressed, it did rebound slightly, but cryptocurrency then entered a long period of stagnation.
Sun-woo and I sold everything back then, and after that we never looked at it again.
Even now, people still argued over whether that crash had really been caused by the justice minister’s remarks.
If a Korean justice minister’s offhand comment truly could wipe out tens of percent of the market, that alone was proof of how vulnerable the cryptocurrency market was to regulation.
Then what would happen if the United States moved to regulate crypto and the exchanges? The shock would be beyond comparison.
But…
"Right now, the cryptocurrency market is basically a lawless zone. The longer regulation is delayed, the greater the damage will be."
If the bubble was going to burst anyway, it was better to burst it early.
Looking at Senator Phillips, I continued.
"And that responsibility will fall to the next president."
After Pether collapsed, regulations for cryptocurrency were finally drafted.
The man who approved and enacted those regulations was Senator Phillips… no, by then he was President of the United States.
The problem was that it came too late.
By then the crypto market had already been collapsing for some time, so the whales used every illegal and underhanded trick they could to dump their holdings as fast as possible, while ordinary investors who entered late in the game were left carrying enormous losses.
"How much damage do you expect?"
"Hard to say. If it bursts late enough, U.S. economic growth could end up one percent lower."
"……."
Senator Phillips looked speechless.
I wasn’t exaggerating. The shock caused by Pether’s collapse really was that severe.
After thinking for a moment, he spoke.
"I agree that regulation is necessary. But at this point, we don’t have a strong enough justification to intervene in the market. And the election is right around the corner."
In fact, he had been calling for regulation since the early days of crypto. But while politics dragged its feet, the market grew too large to handle.
There were tens of millions of cryptocurrency investors in the United States alone.
If you considered their votes, moving suddenly against regulation would be a heavy burden.
"So if there were a justification, you could move on regulation."
"Yes, but…"
As if I had been waiting for that answer, I said, "I’ll create that justification for you."
A flash of surprise crossed his face.
"What do you mean?"
"We plan to expose Pether’s problems. Once the scandal breaks, everyone will understand the need for regulation. At that point, the side that moves first to say it will regulate the market will win the support of more voters."
In other words, it would help his presidential run as well.
Even if I did nothing, he would still become president. But if he believed I had helped him get there, so much the better.
Senator Phillips leaned forward.
"How?"
I explained the plan in brief.
"You mean Snow Crash will issue its own stable coin in order to expose Pether’s problems?"
"Yes. But unlike Pether, we’re going to stay firmly within the system and submit ourselves to the authorities’ regulation and oversight."
The greatest investor alive, White Road chairman Aaron White, always told investors, "Never bet against America."
I felt the same way.
You don’t challenge dollar hegemony.
* * *
(Excerpt)
Snow Crash CEO Lucas announced the launch of the cryptocurrency Penny and released its white paper.
Penny is a stable coin pegged to the dollar at a one-to-one rate.
It will be used for transactions and remittances within the cloud infrastructure built by Snow Crash, and the company plans to expand its business by linking it with related enterprises.
To that end, Snow Crash has signed business agreements with Purple Games Studio, Legend Games, Blackwood Hotel, O'Connor Burger, and others.
By simply linking an electronic wallet through the Snow Crash website or app, users will be able to convert Penny into dollars at any time with ease.
David Lockhart, the head of Continue Capital and largest shareholder of Snow Crash, expressed strong confidence in Penny’s stability.
News that Snow Crash would launch a stable coin drew enormous attention.
The cryptocurrency sites were buzzing.
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