State cryptocurrencies: public currency monopoly and citizen control at stake

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A few days ago, we learned that tests are underway in Japan to create a digital yen. The cryptocurrency, called DCJPY, is slated to hit the market in 2022. In fact, the advisability of introducing state cryptocurrencies has been discussed for some time around the world, technically. stable currency denominated in “CBDC” (Central Bank Digital Currency), the value of which is pegged to that of the legal tender (“fiat” currency) in a ratio of 1: 1.

The European Union itself (like some states) has launched a broadcast and broadcast project of a digital euro on the blockchain, which should guarantee the efficiency, transparency, liquidity and speed of transactions, increasing financial inclusiveness and preventing the risk of money laundering and cyber attacks. But is this really the case? What is behind the sudden and frantic rush by states around the world to create their own cryptocurrency?

First of all, a very important game is being played which sees, on the one hand, the States and, on the other hand, the common “friend-enemy” Bitcoin (symbol and at the same time scapegoat of the whole universe of cryptoasset): there is to be gained the public monopoly of money, still in the hands of central governments, but today challenged by the technological revolution of the blockchain.

It should be noted straight away that there is no universally accepted definition of money, although this concept has been associated with man since Antiquity. In short, experts recognize the coin three functions:

1) unit of account, which fulfills the function of pricing goods and services in numerical units (the more stable the exchange rate of a currency – that is to say less volatile – the more it fulfills this function);

2) store of value, the function of which is to keep the value of a currency stable over time, so that it can be kept as savings and spent in the future;

3) means of payment, which performs the function of exchanging goods and services for a counterpart in foreign currency.

Simply put, governments have a monopoly on money to secure these functions, which is certainly valuable. The stability of the currency is indeed basic for trade and for economic order, as well as for the finances of the citizens. Nonetheless, it has been correctly observed by many that Bitcoin and payment token they do not fully perform these functions and therefore cannot be compared to any type of traditional payment instrument (although the tax administration is of the opposite opinion). Just think of the high volatility of these assets or the fact that Bitcoin, to date, is similar to digital gold, because it is an asset issued in limited quantities, which encourages investors to hold it (“HODL”), rather than spend it.

Apparently, therefore, cryptocurrencies and traditional currencies they could coexist peacefully, however, States are strongly afraid of subverting the dogma of monetary sovereignty for a very specific reason: cryptocurrencies (and in particular Bitcoin) are rethinking the notion of trust which is the basis of economic and therefore monetary relations.

Accepting an asset (gold, banknotes or cryptocurrencies) as money is always based on the confidence we all have in the value of that asset. Ultimately, the acceptance of euro payments by all of us occurs because the European Union and the world market guarantee, in various forms (real or perceived), that the euro will continue to perform these functions. In the old days, gold was accepted everywhere because everyone believed that others would agree to be paid in gold, and this was the case with “fiat” coins. Without trust there can be no money.

Cryptocurrencies are not issued or guaranteed by a central bank or public authority, but rather by all network participants and this revolutionary concept of distributed trust, thanks to the security of the underlying technology, could undermine states’ monetary sovereignty, as Bitcoin is in some ways a more reliable system than central governments and therefore could ‘compete’ with traditional currencies .

But states, with the introduction of centralized stablecoins, not only seem to want to reassert their monetary sovereignty, but could technically go much further, create a penetrating citizen control mechanism, which features lights and shadows. With the introduction of state stable coins, in fact, it will definitely be possible to speed up money transfers (think about eliminating the time and costs of sending and receiving bank transfers), eliminate cash and replace them. with tracked payments in an unalterable manner. In the not too distant future, where everything will be traced and the only state currency will be made up exclusively of an accounting entry held by central administrations, the benefits could be considerable (think of the drastic reduction in tax evasion) , but the risks of censorship and control of citizens they could be huge.

In fact, it is no coincidence that Bitcoin was born in the aftermath of the 2008 crisis, as a 2.0 coin capable of guaranteeing democracy and financial freedom. In more than ten years of existence, Bitcoin has changed a lot and will change again, this is not the solution to all ills (think about the fundamental problem of power consumption), but it’s not even this demon that’s sometimes described. There are those who have even defined Bitcoin as “bad money” (citing a 16th century economic law), suggesting that “good coins” are only state, with a economic paternalism which probably no longer has a reason to exist.

So we need more balance and more attention from all of us. The benefits of a state-owned stablecoin are certainly undeniable, but it is equally desirable that governments around the world turn to Bitcoin and the crypto world. with more courage and a critical mind, embracing the social and economic evolution that it brings into a new economic order, in which Bitcoin could represent the Esperanto of the world economy, without supplanting state currencies.


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