Robin Olsen holds a B.Sc In Computer Systems and has over 20 years of IT Experience.
With cryptocurrency exchanges popping up everywhere and the declining overall intrinsic value of FIAT currency happening also virtually everywhere one cannot help but wonder what the future of currency may look like.
Will nations take control of cryptocurrency creation using nationalized cryptocurrencies? Will Bitcoin become the new global currency of the digital age? What kind of monetary policies can even be created in this freewheeling digital world? Is it all just a scam that will crash and burn?
It seems to me, after dabbling in a bit of cryptocurrency speculation myself, that this ‘wild west’ frontier of the financial world will definitely need to be brought under some form of control at some point. If only for our own sanity.
The financial 'Wild West' has arrived (again)
The National Requirement of Money
The creation of money is a fundamental aspect of national sovereignty, perhaps one of the most important aspects. The national governments will not allow themselves to lose control over that, it would be foolish.
I think a transition is underway that is coinciding with the changing of physical shopping habits. In other words, the more we shop and pay online the more cryptocurrencies make sense. The governments of the world will be forced to react to this emerging medium of exchange and get it under national control or sacrifice any and all control over monetary policy. A nation cannot manage monetary policy or influence the value of it’s currency if it does not handle the creation of it.
Imagine, in the old days a person could have a printing press in his basement and, given access to the correct paper types and the creation of passable plates, could makes tens of thousands of dollars of his own money. This was called ‘counterfeiting’ and is still considered a serious crime. Today, the FIAT currencies have all kinds of safe guards to protect from counterfeiting but still have that problem. It makes no sense that the government would allow anyone with a super computer the ability to create block chain and call it a currency. That’s chaos! Add in the fact that a supercomputer, given the advances in computing that are still happening, probably will not be necessary in the future and how do you control this?
The only way is for a nation to create their own and ban the rest. Simple, effective, especially when everyone will soon have a potential ‘printing press’ in their living rooms, or perhaps even portable ones. I think they will keep Bitcoin around as a global benchmark, a ‘digital gold’ if you will that the rest of the new national currencies can be measured against. The rest will be gone, or at least play a very reduced roll in the official financial world. According to my research, as of writing this hub Google, Microsoft, Apple, Tesla and Facebook allowed for the purchase of stocks using Bitcoin (but only Bitcoin as far as I can tell) and you could not directly buy stocks on the New York Stock Exchange or Toronto Stock Exchange using anything but FIAT currency. Although you could buy Bitcoin itself. So it is slowly working it’s way into the financial world but many of them will not have a place when the dust settles.
Cryptocurrency speculation poll
The Cryptocurrency Speculator
Personally, I would not be spending your bitcoins until the transition is nearer to completion as the value of that currency is still being defined. What you pay a bitcoin for today may be worth only half a bitcoin tomorrow, literally. Not because of poor quality of product but because the value of the coin you just spent has basically risen by a good 30% over night.
If you are speculating in cryptocurrency then be smart about it, in the end it is no different than old school currency speculation that has been going on for years except this new currency is still in it’s infancy and all the regulatory and monetary controls have yet to be established. They will be and then we will see the full transition into national cryptocurrencies using Bitcoin as a base comparison to set an initial value.
The biggest threat to the speculator, in my opinion, is the fact that regulation may wipe their investment out immediately by simply banning the cryptocurrency in question. Keep a 'weathered eye on the horizon' as the sailors used to say...now they use weather radar so...
The Credit Effect
One area that has been overlooked is the overall effect cryptocurrency conversion is going to have on the credit system. Specifically the consumer credit system. Bitcoin, as is most cryptocurrencies, has a set limit of how much of it can be created. If all national cryptocurrencies have their value set based on bitcoin as a global standard then how much of that currency is created is a big deal in determining that value. Currently, due to fractional reserve banking and the fact the global standard is simply another FIAT currency, there is a virtual bottomless pit of money to loan out to whomever wants it.
Allowing this in the cryptocurrency world would be disastrous as it would devalue the national currency versus the global bitcoin and this would be bad when it came to international trade. So the monetary policies on the national cryptocurrency would have to limit it’s creation to maintain it’s value and, from the perspective of us consumers, that’s means no more lines of credit for endless renovations to our homes, or easily available mortgages, credit cards, etc. The absence of fractional reserve banking for all practical purposes is going to make credit much harder to get.
We will have to get used to that, but in the end it is probably a good thing.
The End of FIAT Currency is Nigh?
One should not fear change, especially when you can see it coming. This change is no different.
The 4th Industrial Revolution calls for the coming together of emerging technologies in areas of artificial intelligence, engineering and manufacturing, medicine and virtually every other area of our societies. Cryptocurrencies are what that looks like in the financial world.
Further research and Information
- Cryptocurrency exchange - Wikipedia
A description of what a cryptocurrency exchange is
- What Is Cryptocurrency? Beginners Guide to Digital Cash - NerdWallet
Like real currencies, cryptocurrencies allow their owners to buy goods and services, or to trade them for profit. Here's more about what cryptocurrency is, how to buy it and how to protect yourself.
This content reflects the personal opinions of the author. It is accurate and true to the best of the author’s knowledge and should not be substituted for impartial fact or advice in legal, political, or personal matters.
© 2021 Robin Olsen