That the American Prospect doesn’t like cryptocurrencies is not a surprise. Given that they don’t like anything that’s done not by government the idea that folks might just get on with creating a medium of exchange on their own is, of course, an anathema.
Sorry, but it’s good and necessary policy for governments to have a monopoly on creation of money. Yes, private banks do “create” money when they extend credit, but that money creation is regulated and monitored. Even cash transactions in excess of $10,000 are tracked and monitored for fraud and criminal activity.
If we want the benefits of digital currency transactions without the risks, one idea discussed at today’s hearing of the Senate Banking Subcommittee on Economic Policy, called by Elizabeth Warren, is to create a Central Bank Digital Currency that would be operated and governed by central banks such as the Fed, and available for use by the general public. See more detail here.
Privately created and unregulated cryptocurrencies should not be regulated, as some have suggested. They should be banned.
One problem with this is that no one has ever managed to ban the private creation of currencies. Remembering whose round it is at the pub is a form of money creation – at least, it’s credit creation – even if in a pretty small network. Whose turn it is to bring the donuts to the morning kaffeeklatsch is also credit – and therefore money – creation.
It’s possible to interrupt the widespread acceptance of monies, that’s true, but such interruption is always going to be incomplete – the existence of hawala banking shows that.
Which does lead to this other problem with this idea of banning crypto.
How, actually, does the American government ban guys in China from mining to provide proof of work on transactions undertaken between a Canadian and an Indonesian – just to provide one example. Or, even, an American running a mining rig to provide that same transaction verification between two Americans?
Well, unless you’re going to install a backdoor in every router in the land……ah, we see where Kuttner’s going with this now, no?