In true form, Western governments have suffered from decision paralysis in relation to cryptocurrencies. Meaningful regulation of the cryptocurrency market remains a pipe dream whilst average investors continue to suffer at the hands of the crypto Wild West.
It’s time for our leaders to do what they were elected to do: lead. The market cap of the cryptocurrency market is not in the billions, it’s in the trillions, soaring above $3 trillion in the bull run last year. The crypto genie cannot be put back into the bottle, people clearly want digital finance that is fit for the digital age.
James Caan, the founder of the Hamilton Bradshaw private equity firm, is one of the U.K.’s most successful entrepreneurs. From 2007 to 2010, he was an investor on “Dragons Den,” the British version of “Shark Tank.”
That’s why it’s time for government-backed digital currencies to reign supreme. The days of endless money printing must end; governments must finally deliver a currency that their populations can use and trust.
I can empathize with the crypto vision. Simple mathematics will tell you that fiat currency is flawed; artificially creating money with reckless abandon will inevitably devalue the currency. As currency became untethered from the real value of gold, I understand why many feel that fiat is only worth the paper it is printed on.
Satoshi Nakamoto’s white paper is a logical conclusion of widespread disillusionment with the financial status quo. After all, currencies are the building blocks of our economy; they should not be subject to the whims of a handful of the government’s fiscal fiddlers.
Yet we can’t have a clean break with the past financial system without a robust alternative to fill the void; bitcoin is not it. Any bitcoin believer will tell you that its scarcity, like gold, makes it an inherently deflationary store of value.
Yet bitcoin, and the host of cryptocurrencies biting at its heels, are leaving a trail of destruction in their wake. In a dot-com era style gold rush, many civilians are seeing their life savings being wiped out overnight. The wild lack of regulation is an obvious open door for scammers like Ruja Ignatova of the infamous OneCoin to rush through.
When approximately 1,000 people own a 40% share of all bitcoin, average retail investors are merely krill to the “pump and dump” schemes of a handful of bitcoin whales. When Elon Musk moves entire markets with single tweets, it becomes clear that the cryptocurrency market in its current form is a dangerous beast that Western governments have no idea how to contain.
Cryptocurrency opportunists exploit a stunning lack of governance. The American regulatory framework has been trying to understand and regulate cryptocurrencies for years, with nothing to show for it. Legislation of cryptocurrency remains blocked in Congress, whilst many industry leaders have predictably described the most prominent proposal to date, the STABLE Act, as a disaster.
The U.K., where I’m from, isn’t doing much better. The Bank of England’s backed “Britcoin” is only set to launch in 2025, a lifetime away in crypto years. The government has issued piecemeal regulations on exchanges, while our regulator, the Financial Conduct Authority (FCA), continues to issue confusing and often contradictory “warnings” on the volatility of the crypto market. In the U.K., cryptocurrencies remain largely unregulated financial instruments to this day.
Western governments need to stop sitting on the fence. They need to choose a path and stick to it. While crypto innovators continue to baffle government employees in endless hearings, our populations remain prey to the wild crypto volatility.
This decision-making vacuum has not been echoed everywhere. In true form, China flexed its top-down force and exerted a muscular crackdown on bitcoin, and issued their own digital yuan to run in parallel. On the other end of the spectrum, El Salvador adopted bitcoin as legal tender. Regardless of the strength of these two opposing positions, what they have in common is decisive leadership; that is precisely what both the U.S. and the U.K. are missing.
I don’t suggest we follow either the Chinese or Salvadoran route. Rather, the Bank of England and U.S. Federal Reserve should marry the benefits of the cryptocurrency revolution with the strength, trust and security of the central banks.
That’s why they should issue their own, blockchain-based digital currency that has its own, fixed quantity. Such a digital currency, if instigated correctly, should relegate the irresponsible practice of money printing to the history books.
We might ask whether governments or central banks are best placed to create their own cryptocurrency. Yet we must remember, they are not being asked to re-invent the wheel. There are more than 8,000 cryptocurrencies, most of which are open source. This should serve as an exhaustive recipe book for any government coder.
Of course, government-issued digital currencies will never win over the crypto diehards. However for those who simply want to transfer fees instantly across borders, a government-backed digital currency is long overdue.
Dither and delay won’t cut it anymore. It’s time for our governments to accept that people want the benefits of digital finance, without the volatility and financial risk that is built into bitcoin and its contemporaries.
Our governments need to take their heads out of the sand and step into the 21st century. That means offering their citizens a third way between archaic fiat currencies and dangerous cryptocurrencies. That’s why 2022 should be the year of government-backed digital currencies.
Source: Coin Desk