Rahm Emanuel, former chief of staff to President Obama, sarcastically advised, “Never let a good crisis go to waste.” Enemies of cryptocurrencies certainly take this adage to heart. After the collapse of cryptocurrency exchange FTX and the subsequent indictment of Sam Bankman Fried that began in November 2022, many on the left and some Republicans have attacked the concept of a store of value or medium of exchange. started. The government can’t control it.
Democratic Sen. Elizabeth Warren has announced that she is “forming an anti-crypto army,” while the Securities and Exchange Commission has filed charges against two top crypto exchanges, Coinbase and Binance. SEC Chairman Gary Gensler (referred to by critics as Goldman Gary) has expressed disdain for cryptocurrencies. We already have digital currencies. It’s called the US dollar. It’s called the euro. It is called a yen. Now they are all digital. ” In other words, government currency is good. Decentralized currency: bad.
To understand the hostility towards cryptocurrencies, it is best to take a step back and think about money as it is traditionally understood. Money is a means of storing value and facilitating transactions. Traditionally, monetary systems have involved a central authority: a government or a government-related central bank. Governments want to control money, so they can control the money supply, the international exchange rate, and thereby the economy. Cryptocurrency, on the other hand, uses blockchain, which is a digital ledger like a public register where cryptocurrency transactions are recorded. Blockchain is decentralized. There is no person in charge or organization. Being open source, the public is free to access and track any changes made. Cryptocurrency poses a threat to government power and control by breaking the government’s monopoly on money.
There are at least three reasons why freedom-loving Americans are skeptical about fighting decentralized digital assets.
First, cryptocurrencies allow people to choose a medium of exchange other than traditional government-monopoly money. Governments have political and economic goals that may conflict with consumers’ interests, separate from consumers’ desire to have a secure and liquid store of value. In times of financial instability, assets often “flee to the dollar” with the assumption that the U.S. dollar is the safest and most stable currency. But as the United States pursues ever more reckless budgetary and monetary policies, with the national debt exceeding $34 trillion and interest on it exceeding $800 billion annually, many people I wonder if it will remain stable. Cryptocurrencies may offer consumers another means of exchange if they choose.
Second, decentralized currencies have the potential to provide financial privacy in a world where privacy is under attack. Consider the case of China, which banned cryptocurrencies in 2021. As part of a broader campaign to tighten financial oversight, China has launched a central bank digital currency (CBDC). India is similarly moving ahead with plans to launch a CBDC to “promote non-anonymity at the individual level” and monitor transactions. In the United States, the Supreme Court ruled decades ago that people have no reasonable expectation of privacy when providing information to banks (US v. Miller, 425 US 435, 1976 ).
Those who want to protect their financial privacy may seek an alternative to traditional centralized currencies. The question we must ask is why some policymakers want the United States to adopt a policy towards decentralized digital assets similar to China and India.
Finally, financial privacy is especially important now that federal government censorship is increasing. “Across the world, governments freeze the financial accounts of activists and rivals to eliminate competition,” says Nicholas Anthony of the Cato Institute. No matter the developed economy, one thing remains the same: governments rely on private banks to freeze accounts. And those banks must comply.”
I’m writing this from St. Charles County, Missouri, and this is not a theoretical speculation. On April 15, 2021, the Federal Trade Commission announced it would sue respected St. Charles chiropractor Dr. Eric Nepute for $500 million. During the course of the lawsuit, five bank accounts were frozen. Dr. Nepte was “debanked” and his clinic and business effectively closed. His violation? Promoting the idea that vitamin D and zinc supplements may help prevent coronavirus infection and death. This is an idea that has considerable support in the medical literature, but is rejected by the Biden public health administration and Dr. Fauci.
Canada’s neighbors experienced the weaponization of the financial system against free speech in 2022. That’s when Prime Minister Justin Trudeau invoked emergency legislation to freeze the personal bank accounts of truck drivers and other protesters exercising their right to protest against COVID-19 regulations. Did.
As privacy comes under increasing attack and government censorship becomes more prevalent, financial privacy is more important than ever. And decentralized digital currencies offer a way out of the surveillance state tactics increasingly used by the federal government.
Decentralized digital assets, or cryptocurrencies, are in their infancy and the technology is developing rapidly. The events surrounding FTX clearly demonstrate that cryptocurrencies, like any investment or asset, come with risks and that scammers are always on the lookout for victims. But as Congress and states consider the direction of the law in this area, the question is whether we prefer the direction taken by the Chinese Communist Party, or where consumers and freedom of choice dictate. be. Economic freedom is a fundamental right guaranteed by our constitutional republican form of government.I would advise the path of Thomas Jefferson and Adam Smith, not Elizabeth Warren and President Xi.