Bitcoin was invented eleven years ago this month with the release of the famous white paper by Satoshi Nakamoto. The little crypto that could has rocked the world financial order, not only because of its high performing price – with no shortage of volatility – but because its underlying technology has been copied by legacy institutions to create a much better and more secure user experience.
In this time, regulators have found the cryptos to be an annoyance. In the United States, in general, given the radical nature of the project to create a non-government money for the digital age, the response has been surprisingly calm. The regulators hectored but didn’t ban it. They investigated but they mostly didn’t resort to outright violence to stop it.
When Facebook proposed the Libra, however, moral panic swept Washington. Bitcoin is for geeks. Let them have their fun. No normal person understands this stuff anyway. But Facebook? It’s powerful, global, compelling, and easy for everyone to use. A Facebook-style crypto currency? That could be deadly not because it would be bad for consumers but because it would be bad for government!
How can you have a national monetary policy when everyone is using a new global currency that is valued according to the market and not the Fed? How can the money monopoly survive under these conditions? What could it possibly mean for government to give up its control?
Mark Zuckerberg, in Congressional testimony, kept warning that the US is falling behind China in payment innovation. It’s true. The trouble is that if you care mainly about power and control, this is an irrelevant fact. Falling behind is just fine so long as the legacy system is kept on life support, according to this view.
In general, Zuckerberg spoke with passion and conviction but with far too much acquiescence to the regulatory mob attack. No matter what he promises, they will never get on board. Washington can slow it down but can’t stop what’s coming: currency will be privatized.
I explained more in my appearance on Money Talks.