It is almost hilarious that the UK is thinking about a digital currency which its chancellor is calling Britcoin.
The most hilarious part of this, at least to me, is that the UK pound is exactly a digital currency already.
The US dollar is a digital currency, the Yuan is a digital currency, The Euro is a digital currency. Its hard to imagine there is a modern currency that isn’t almost entirely digital. Almost all our money is digital. Only small amounts of the money in circulation is in anyway not digital. Non digital money like for example physical cash is only a tangible tip of a vast iceberg of money all of which is digital.
Modern money is digital, yet the cretinous drumbeat of people reporting governments planning digital currencies goes on as if that is anyway meaningful.
Money as we are used to it, the non-crypto kind, are just records on computer ledger, but unlike a Bitcoin the ledger is centralised and the rules of the monies issuance and handling is centrally controlled, directed and regulated.
The difference between a ‘Britcoin’ and a ‘Bitcoin’ is the difference between a British pound today in your pocket and a sprinkling of Satoshis somewhere in the crypto-ether. Their digitality is the least relevant of their differences.
Decentralised money is utterly different from centralised money. Cedntralised government will never issue decentralised money. It would not even be a good thing. Government will never, can never give up their control of currency. It is their currency is the other sense of their money defining who and what they stand for. They will and cannot decentralise. Power, money and centralisation are the core of politics. Who would even want their elected governments to give up that dynamic?
Crypto is not a replacement technology for money, it is a new asset type. It is a fabulous new source of wealth made possible by the enabling technology of computing. A bitcoin can not replace a UK pound and a Britcoin cannot replace a Bitcoin.
There is a pretty concrete reason why Crypto is not the way ahead for everyday money and that is it by its very nature not part of the banking system. It doesn’t replace the banking system and it barely intersects with the Juggernaut of modern finance that makes the world spin. If a country came up with a currency that didn’t need to be banked then the current system of fractional banking would simply cease to exist because there would be no deposits. Without deposits, without banks our modern economic system simply doesn’t exist.
No government is going to turn its currency into an instrument that can simply disappear like the buried gold of ancient times and it was amusing to hear UK legislators were recently in a panic about how much cash was apparently missing and by implication in the hands of bad actors stashing fortunes away from the authoritarians for all kinds of nefarious reasons. Govenments need and want to know where the money is, need to control it, debase it, confiscate it, know how much is in play.
Government currency will always be centralised and the core power of Crypto is that it is the very opposite.
Cryptocurrency is decentralised or it is just a voucher like a food stamp or Amex traveller’s check. A government centralised digital currency is nothing more than what we already have. As such the paths of Crypto and digital currencies has already diverged and they are unlikely to ever come together in the future.
However it is clear that the politicians and the central banks are waking up to the fact that with Crypto a financial behemoth has awoken and that they must ‘ape in.’
This must be good because while it appears there is still little comprehension about the scale of the coming crypto revolution, authorities are in a strong position of stunt the abilities of their economies to capture the win. Take the $750 billion of wealth created by Bitcoin since the halvening. Who won that? There are certainly many countries that have missed out on that historic economic windfall.
The potential is trillions more and many countries will simply not capture any of those gains.
Whether FOMO will be enough for countries, to grasp the opportunities is to be seen but it is dawning on countries like the UK that Crypto will turn backwaters into the muscular economies of the future and that it will also turn economies that do not embrace this revolution in backwaters if they do like this economic revolution pass them by as so many European countries let the industrial revolution get well underway before they were prepared to jump into that new world.
The UK is not going to kill its banking system by creating a currency where the cash can melt away into digital wallets outside of the banking system. No country will. Perhaps in the next 20 year there will be some kinds of centralised money with a gimmick or two. Meanwhile Crypto will have already turn the whole world upside down. It seems that government simply can not keep up and that’s probably a good thing.