Thoughtful Friday: Digital Currencies & Politics
On Fridays, the House Panda team comes to Medium to tackle the wider questions of the token and tech economy
One of the exciting parts of being in blockchain and AI is that both fields are so fresh and full of news. There is never a slow news day — we are stretched to know everything that is happening across 3 continents, not to mention the conferences.
However, while some are already complaining that topics at blockchain conferences are becoming too repetitive, what is rarely discussed is the relationship between digital currencies and politics. We wonder why — lack of information, waiting to pick a side or refusal to poke a sleeping bear?
It does not seem that the bear in the room is particularly aggressively-inclined. The ECB is calm about digital currencies. So is IMF. So are European governments. So are Singapore, Hong Kong, Japan and, halfway, South Korea. There is fear that SEC might try overextend its supposedly heavy hand worldwide, but there is no chance its jurisdiction would extend into the European Union and much of the rest of the world. European countries like Sweden are largely demonetized, so much so as to arguably inspire Modi’s India. Intelligence agencies, aparently, can track bitcoin transactions, since they are not anonymous. The sea is calm.
What draws our attention instead is the seeming correlation of the ending of the economic boom cycle and the popularity of cryptocurrencies, coupled with high-level digital currency endorsements from the likes of head of IMF and president Putin. A particular case in question seems to be Japan — a country that holds enormous pile of debt borrowed from its own nationals (thus not as dangerous), a country that has been trying to encourage consumption (with little success), a country that has ran out of growth avenues but is increasingly positioning itself to a rivalry with China. The natural explanation seems to be that Japan is seeing crypto currency potential to encourage consumption stealthily without using any of the usual methods that would be interpreted by the debt markets. If you will, Japan seems to be encouraging a parallel economy to support the main one, with everybody pretending it’s not really happening.
As it happens, eastern Europe saw something similar during the transition from communism in the early 1990s.
There is also what looks like a clear divide between stances of allies of the USA (crypto-friendly), dependent on global trade and formerly US-led globalization and those on the other side, like China, for whom national sovereignty comes first.
All of that points to a deep and active state involvement with crypto currencies directly or as not-disinterested observers.