The New York Fed recently posted an interview with economists Michael Lee and Antoine Martin discussing the future of Bitcoin and other crypto currencies. Specifically, they dove into the subject of what would make crypto currencies appealing in our modern, centralized world.
The discussion centered around the idea of trust. Both agreed that crypto currencies provide value to people, but we're quick to peg that value to a very specific scenario in which trust is absent from the payments culture of any given marketplace. They contrasted that with the long-standing centralized system of Fiat currency, which they argued is predicated on the trust that people place the governments that issue them.
“But in this world, where people do tend to trust financial institutions to handle payments and central banks to maintain the value of money it seems unlikely that bitcoin could ever be as convenient as existing payment means,” Martin said.
Contradictory Statements
What's most interesting about the interview is how people who couldn't be more ingrained in the Fiat system continually bring up the positives of crypto currency while remaining mostly dismissive of the idea as a whole.
The most glaring example of this is when they mention the idea of Bitcoin being used in illegal activities. The obvious agenda here is to discredit crypto currency as something that is only used by those individuals who are at the bottom wrung of society. This is typical of the type of bias we see from the agents of Fiat against crypto currencies and one that causes them to completely miss the point.
But really what they should be talking about is that Bitcoin’s use on things like the Silk Road are a strong proof of concept for the anonymity and security that crypto currencies provide. This will make it a viable medium of exchange in nondemocratic or authoritarian countries where no one would question the moral validity of getting around the existing, centralized authority.
And of course, as we are seeing with China right now, authoritarian governments don't like it when they can't control economic payments.
Central bankers refuse to open their eyes
Overall, the interview was a good read, and the economists are definitely correct that crypto currency can solve economic problems in space where trust is nonexistent. However, as with all denizens of the glass and ivory towers that underscore Fiat currencies, they can't see the forest through the trees.
The reality is that there are places right now where people are looking for decentralized, anonymous payment solutions. Saying that crypto currencies “would” be great in the space where trust is nonexistent — as if it was a theoretical and not relevant to the world today — continues to illustrate a fundamental misunderstanding of the use and value of crypto currency right now.