Anyone who is even remotely plugged into our modern world has seen it happening. It’s been one of the big market stories of this year. That is the meteoric rise in the value and usage of bitcoin and secondarily other crypto-currencies. There were plenty of people who were predicting this before it happened and plenty of doomsayers now screaming that its bubble is about to pop. This is the same thing that happens every time a trendy new stock or commodity starts to mainstream. This isn’t a valid fear with cryptos because of its very nature. There is however a greater fear with these that is not being sufficiently analyzed.
More people around the world are using digital payment every single day. This is nothing new in the United States, here we have advanced the technology to the point where without thinking twice you can pay for something merely by waving your phone at the cash register. As revolutionary as this might seem it is being taken even further over seas and around the world. There are countries and jurisdictions where cash has been recalled and even in some cases confiscated. In these places people are required to use any of a variety of digital payment methods. This most commonly takes the form of credit/debit cards but is not limited to these. This is where we see the value of cryptos.
To this point crypto-currencies have been completely anonymous and almost completely unregulated. They are to digital transactions what cash always was to checks or debit card transactions. These currencies essentially allowed for web based farmers’ markets, where there was no fixed exchange rates and goods are traded by no standard other than what someone values them at. This is perfect for people uncomfortable with the government’s approach to monetary policy or people who simply take their privacy seriously and are uncomfortable having their purchases tracked.
These benefits are not going to last much longer. By coming into the mainstream they will without fail follow the historical trend of attracting the attention of government regulators. This is what happens when anything is perceived as getting too large or mainstream. This may not seem like a big deal to some. So what they will ask. What does it matter that there will be a small transaction fee? Does the loss of anonymity matter if you aren’t committing a crime? I believe these to be silly arguments but it won’t stop them from being made.
Not only will the greatest benefits be lost some time in the near future, but we need to look even further ahead and see what else is coming. Here in the United States we haven’t seen the removal of cash from the economy yet, but how far away do we really think it is? Polities as disparate as India and the Scandinavian region have begun these processes. We are culturally inoculated here to resist this exact sort of change but to think that it isn’t inevitable is foolish. So where will that leave us?
This is where the greatest problem will come in. Crypto-currencies will have already been regulated to fix their values, eliminate their anonymity, and tax them to ensure the government’s cut. Then we will lose our access to cash, our ability to transact anonymously in person. This will allow the rule makers and people in charge to eventually decide what can or can not be purchased or at least how it may be purchased. I can not overstate how significant this is. I do not want to sound paranoid, but it would be foolish to assume that this would not be the next logical step.
Economic freedom has always been the most sure guarantor of our other freedoms. If you care to protect these freedoms, then its time to make sure you have an exit strategy from the crypto market. It’s still profitable, so if that is your thing than make your money now and get out. Bitcoin won’t be a safe haven for long, and its likely that no other crypto will be either. This is what happens when we don’t pay attention to whats in a name, we let it go mainstream and now we are about to reap the regulatory whirlwind. Get ready.