Bitcoin and other cryptocurrencies are in bad shape. The carnival money of the internet cannot compete with the powerful machines of international finance, writes Constantyn Roelofs.
Coin land has been rumbling for a while now. Bitcoin could one day become the means of payment of the future: by recording transactions decentrally on the blockchain, we would finally be rid of those nasty banks and a golden age would dawn in citizens’ wallets. According to the libertarian ideologues behind the coins, we would also be rid of that miserable government that looks over our shoulders all day long and imposes far too many restrictions on the economy.
Historian explores weekly Constantyn Roelofs (1989) on ewmagazine.nl the tragicomic contradictions in economy and society.
After a considerable hype with gigantic valuations for all kinds of ‘coins’ sprouting like weeds, we are now in the ‘crypto winter‘, while at the same time the European Union is busy introducing its own digital currency.
Harder than expected to build a decentralized currency
A little about the crypto winter. The majority of the large, secondary crypto projects such as crypto exchanges and stablecoins turned out to be pyramid schemes – see the recent, much-discussed bankruptcy of the crypto exchange FTX and its founder Sam Bankman-Fried – and it turned out to be more difficult than expected anyway to establish a decentralized build coin. After all, money is only used to a small extent for daily payment transactions of the kind that bitcoin is suitable for.
Most of the money is in large, long-term credits such as corporate loans, mortgages and what not, with the government as a powerful money creator and redistributor. You need a whole complex of banks, credit rating agencies, rating and regulatory authorities to make the system somewhat safe and manageable.
Money system without governments turned out to be an illusion
Bitcoin’s big existential problem is that central financing projects to build dykes, residential areas and multinationals simply have much more clout than decentralized financing. The carnival money of the internet cannot compete with the powerful machines of international finance.
Moreover, every monetary system begins and ends with a government and a tax office. The crypto believers wanted to get rid of that and there was once the hope that the internet could be a kind of borderless country without governments, but that also turned out to be an illusion. In the end, the internet is just a collection of cables and switches and to pull those cables, you need permission from the municipality. End of bitcoin dream.
EU investigates CBDC
Just when the market is starting to realize that decentralized currencies are just clumsy and stupid, the EU will of course investigate its own crypto currency: the CBDC must put an end to the maze of national central banks that exchange the euro through the banks in their countries. into circulation and bring coins directly from the ECB to the citizen. Much is still unclear about the CBDC.
The wappies are already very sure that the new digital currency will be ‘programmable’, so that you cannot spend it on cigarettes and you will no longer have access to your wallet when your CO2 budget is reached, but that is still a long way off unsure. It is also a bit unclear to the outsider what the technology behind the coins will be: will it be a coin on the blockchain? Just fiat money? Something very new?
The Hague proposes, but Frankfurt disposes
What is certain is that national politics is completely impotent against the power of the EU. The Netherlands has only limited influence on the monetary policy of the EU. This was already apparent from the reprint mania of recent years, all the transfer mechanisms from North to South that have been introduced against all agreements, and now again from the debate about the CBDC.
It is also apparent from the parliamentary debates about the future of money and Minister Sigrid Kaag (D66) simply admits it: The Hague proposes, but Frankfurt disposes. It is ironic that the future of digital money apparently lies in further centralization by powerful central governments, but that is how money goes.