In the end Bitcoin wins, Central Bank Digital Currencies lose.
I have never understood why banks exist in the first place. Anytime I have questioned the existing banking structures I have been told by people far more intelligent than I would ever be, that it existed way before I was born. This is rather surprising since I’m actually quite old. Or so I think.
That is until Bitcoin came along. Its entire concept simply made sense, that is of course until governments and central banks began to crack down on it and tried to make it infamous.
To many around the world, this is simply the government trying to “protect” its citizens. When you live on my side of the world, this was simply politicians who were bad at their jobs and doing very well to mismanage the economy preventing the people from having access to a much better and well-structured monetary system.
Generally though, whether your country has good or bad politicians managing the central bank and the economy, this was a clear message. Central banks simply wanted to be in control even though we all know how very much flawed the system is.
US Dollar vs Democracy?
Seeing as Bitcoin gives power to the people it’s a bit surprising why the government that champions democracy the most wasn’t the first to adopt a technology that is the definition of democracy itself. You’d think that the United States Government would actually go around the world lobbying for its use. However, they have fought hard against it just like most Central banks around the world. This is not very surprising since no government that controls the entire world with their currency (the dollar) would like to relinquish that power anytime soon.
The U.S’ most powerful force is not its military, culture, or economy. It is their currency. Till it remains the global standard, the US can print unlimited amounts of money which the world would absorb. Thus, “outsourcing” US inflation as Aviral Bhatnagar puts it.
Crypto could be the dark horse disrupting this world order. Keep in mind there are only going to be 21 million Bitcoins. Bitcoin miners can never mine any more than that.
Funnily enough, Banks in their ferocious bid to “kill” Cryptocurrencies are actually getting us a step closer to its adoption. I will explain how in a bit. The truth is, you cannot kill what the people want.
Let’s take China as an example.
China, Evergrande, and Bitcoin All-time highs
China for one has banned Bitcoin more times than I can remember. Unfortunately for China, banning Bitcoin isn’t as simple as banning Facebook or Google and building local versions of them. It is a lot more complex than that. There’s a reason why Bitcoin still exists in China despite it being banned several times. The reason is simple, Bitcoin cannot be banned if the people truly want it. It is for this same reason why Nigeria hasn’t been successful with its Bitcoin ban either.
It’s also quite interesting to see China ban it at this time in particular when their Evergrande Scandal could do just as much harm as the Lehmann Brothers Scandal which led to the global financial crisis of 2008 did.
Evergrande in China could very well become worse. And experts warn that there could be another global financial crisis or an economic slowdown in China.
The last time there was a global financial crisis in 2008, Bitcoin was born in 2009. That is not a coincidence.
China will need Bitcoin just as much as the US needed Bitcoin in 2008. It’s almost inevitable. Bitcoin all-time highs are approaching.
A Bold New Plan
The new game plan of Central Banks is to launch Central Bank Digital Currencies or CBDCs. In a last-ditch effort to save face and retain power.
According to Christine Lagarde, the president of the European Central Bank, about 80 central banks around the world are hurriedly looking at adopting digital currencies.
You see it is their hope that central bank digital currencies (CBDCs) will eventually kill Bitcoin. But this is the funniest joke I’ve heard in a while.
CBDCs are simply an extension of a Central Bank’s fiat currency. It does not solve the underlying problem of the current messed-up financial system, it only digitizes it.
Why CBDCs Will Not Kill BTC but rather propel it
CBDCs are the digital extension of fiat currencies; this makes them subject to the usual rules of fiscal policy and economics. Federal regulators can perpetually print digital notes for quantitative easing, increasing inflation, and reducing purchase power.
Bitcoin is decentralized, there is a fixed amount, and there is no governmental control over BTC. The blockchain is transparent; all transactions stay in the blockchain. The beauty of bitcoin is that transactions are traceable. Remember that time Virgil Abloh donated $50 to a Black Lives Matter protest? Yeah, we’d have caught that on the blockchain if he hadn’t posted it on his Instagram as well.
BTC and CBDCs can be used simultaneously, and there will always be a need for people to have an alternative to centralized and controlled CBDCs. Therefore, the introduction of CBDCs is unlikely to have an impact on BTC.
As a matter of fact, if financial institutions build out the infrastructure to transact and store CBDCs, similar underlying infrastructure with a few tweaks here and there, could be used to support Bitcoin. Millions, perhaps billions of people, will have access to digital wallets and get accustomed to digital money, making it easier to use BTC.
This increases Bitcoin’s utility, and therefore value. Therefore, the proliferation of CBDCs will indirectly give Bitcoin a boost, increasing its value and relevance.
You see the hard truth is, we may very well never fully transition to a crypto economy overnight. Not every country will be like El Salvador and simply flip the switch. These things take time.
Cash is still very much used around the world. If Central Banks force everyday people in society to transition to their CBDCs and stop printing cash altogether then everyone would get on the digital train. With everyone on the digital train, it’d be super easy to lure them onto the Bitcoin train.
Balaji Srinivasan puts it brilliantly in a tweetstorm.
“Do I think decentralization wins in the end, that encryption wins in the end? Yes, but it’s not a magic spell. Capitalism won in the end but the “regulations” of the Soviet Union were indeed a bit of a setback.
We must fight for freedom with every tool we have at hand.”
And I couldn’t agree more.
