Banning Bitcoin is stupid. Non-state digital currencies will soon sweep away our monopoly money
The winner of this week’s King Canute prize for attempting to hold back the tide goes to the government of Thailand. Why? They have just decided to ban Bitcoin, the new digital currency.
Bitcoin – which exists only as a string of computer source code, and in so far as people are willing to exchange ownership of it for other things – cannot lawfully be used to buy and sell in Thailand.
Monetary authorities in Bangkok fear that this upstart currency cannot be subject to capital controls. And they are right. It can’t. But banning Bitcoin won’t end a very 21st-century conundrum for governments everywhere.
“A digital tide is coming in, and it will sweep away the post-Bretton Woods system of monopoly money. No government, in Thailand, or elsewhere, will ultimately be able to stop it.”
A digital tide is coming in, and it will sweep away the post-Bretton Woods system of monopoly money. No government, in Thailand, or elsewhere, will ultimately be able to stop it.
Personally, I am a bit of a Bitcoin sceptic. I suspect it might be to the future of private currencies what the ZX Spectrum was to the future of personal computing. Much hyped, we can all sense it might just be the start of something big. Yet for all that, no one seems entirely sure what to do with it.
To catch a glimpse of our monetary future, perhaps we should look not to Bitcoin, but to Africa. No, not the half-baked idea of an East African monetary union, but to the success of something called Mpesa.
Ostensibly a way of paying for things using mobile phone credits, Mpesa allows tens of millions of Africans to do so without a costly banking system attached. Payment without banking!
Yep. But that’s only the start. Imagine if a mobile phone company were to decouple the value of its credits from the local official currency. With monopoly money inflation in double digits, it would only be a matter of time before folk used a virtual payment system to store wealth, not just buy stuff. Money without a government!
Try to imagine what might happen here in the West if we were to have 1970s levels of inflation, combined with 2019 rates of internet usage? We might not have to wait too long to find out.
A generation ago, the last time our monopoly money currency was seriously debauched, there were – as the Thai authorities would appreciate – capital controls. Only very rich people could safe guard their wealth buy buying old masters paintings, or other such assets.
Thanks to the internet, today ordinary folk can not just shop around. They can do so in all sorts of currencies. Whatever the law says in Thailand or elsewhere – unless the authorities plan on monitoring every online transaction – we’ll be able to store wealth online in all kinds of ways. Currency competition and non-state issued money is only a matter of time.
Far from being a product of deliberate design, I suspect the successful non-state currencies of the future might be almost accidental; an online supermarket voucher scheme, perhaps, which retains its worth better than the Bank of England alternative?
The whole point about King Canute trying to hold back the tide is that he knew at the outset that he couldn’t. He was, so the story goes, trying to demonstrate to his underlings, the limits of a rulers power. A thousand years on, it seems many have still not learned the lesson.