Just how much will peoples’ attitudes have to change to allow widespread adoption of a private cryptocurrency like Bitcoin or Ethereum? Responding in a comment to my post earlier this week on the possibility of government-issued cryptocurrencies, my colleague Fergus Hodgson points out that governments could never be trusted to keep the supply of their digital currencies fixed or growing at a predetermined rate, the way private ones ideally operate. He’s right that this protection from inflation or other government meddling is one of, if not the most important advantage of private cryptocurrencies. But the comment got me thinking: how many people actually know that? For a significant conflict between fiat and private currencies to take place, a large share of the public would have to view such inflationary meddling as a serious problem, and most people aren’t daily readers or writers of blogs criticizing government monetary policy.
With perfect timing, the Cato Institute released a fascinating survey about consumers’ financial behavior and attitudes toward regulation yesterday (Emily Ekins has a highly-recommended detailed writeup of the survey; she and Thaya Brook Knight also have an article on the questions concerning the Federal Reserve). The survey doesn’t touch on inflation or currency directly, but is illuminating for our question nonetheless.
As Knight and Ekins say right at the top, “Americans know very little about the Federal reserve.” 80 percent of respondents describe their understanding of what the Fed does as less than “very well,” and over a quarter either report not understanding it at all or having not heard of it. This lack of knowledge about such a key financial institution underscores the level of education that would have to take place before most Americans could make informed judgments about fiat versus private currencies. Similarly, when asked whether the Fed or the free market should determine interest rates, 44% (a plurality of respondents) report not having thought about the issue enough to have an opinion. Interestingly, of those who did have an opinion, 58 percent opted for the free market, potentially suggesting that education could push public opinion closer to favoring private currencies. Many other results throughout the survey show the expected result that views on regulation and policy are starkly split by political and partisan lines.
I tend to think that right or wrong, it’s going to be hard to get the average American to let go of their dollar. Perhaps simply having a viable cryptocurrency as a credible option alongside the dollar would spur education and decide the matter one way or the other. And perhaps other factors would shift the scales toward cryptocurrencies (such as lower costs from disintermediation, and financial innovations like ICOs and smart contracts that need blockchain technology to run). I think a gradual shift is very possible, but they key word is gradual—both the technology and public opinion will have to evolve before widespread adoption takes place.