Unregulated, No Standards Currency. What Could Possibly Go Wrong?
A Bad Idea Goes Global .
I have watched with some fascination, and concern, the spread of cryptocurrencies. Once the purview of financial oddballs and anarchists, cryptocurrency has become much more mainstream in recent years. Some large banks are dealing in this domain now and use of this currency has become global. Just this week Facebook announced its own cryptocurrency. This latest entry may be somewhat different – it feels almost as much like a bank as a currency – but time will tell.
The whole concept of cryptocurrency strikes me as a singularly bad idea. The track record so far validates that judgement. I would be pleased to see banks, governments, and international agencies work to minimize, if not eliminate, this phenomenon. I favor doing so for societal and for individual “investor” reasons.
Have I Got a Deal for You..
The societal reasons are the strongest. Currency is the lifeblood of modern society. It is a primary stabilizing and connecting element. It has been so in some ways since the Roman empire. History is full of chaos in times of nonstandard currency. Read about the early USA when states and banks produced their own currency. The Southern states did not fare much better with their currency during the Civil War. Money is a core function of government. Letting that function slip out of government jurisdiction is the slipperiest of slopes to nowhere.
The personal “investor” reasons are no less compelling. We have all heard stories of people who lost their entire fortunes overnight. A given cryptocurrency suddenly crashed, for no apparent reason. Stock and commodity markets are erratic enough themselves. Cryptocurrencies are like markets on drugs. Completely unpredictable, no transparency, no real logic to how they operate. Major movers and shakers are unknown.
My favorite story along these lines is of a manager of cryptocurrency accounts who suddenly died. No one had the password to his account management system. There has been no luck in breaking into the account. Millions of dollars belonging to thousands of people are simply gone. But the dead guy’s wife says she is still looking through his stuff to see if she can find a note anywhere with the password. Great!
Bottom Line
These things undermine national economies and international commerce. In times of crisis and social breakdown, people will flee to these devices the way they traditionally have to gold or silver. Only with even less security. These things put at risk people that should know better, but do not. They serve little useful function, other than for criminal purposes. It has gotten popular for tech bandits who hijack computer systems to demand payment in Bitcoin. One legitimate business need would be for legal marijuana growers. They, because of senseless federal banking regulations, often cannot use banks.
There are occasional good uses for cryptocurrencies. This could be especially true in countries with poorly functioning economies or nonconvertible currencies. These are not sufficient reasons to have what is going on today. Get some standardization and regulation in place or kill off the system as much as possible.
Bill Clontz
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