The irresponsible libertarian justification for all manner of bad behavior – popular in Silicon Valley – has found its greatest expression in cryptocurrencies like Bitcoin and its ilk. The anonymity of cryptocurrencies had made ransomware a global criminal enterprise.
Currencies are traditionally a medium of exchange, a store of value and a unit of account. Cryptocurrencies are bad in all three.
Yes, they are a medium of exchange, but try to buy a house with one. Painful.
As a store of value, they are extremely unstable, as there are no underlying assets, such as a nation’s full faith and credit. This is reflected directly on the third use of money – a unit of account – how to keep an accounting book with a currency whose value keeps changing?
If you own a cryptocurrency and are not a criminal, you are a speculator. To see how it ends, check out Tulip mania.
Anonymity is the problem today
Good arguments can be made in favor of a global digital currency, although this also poses serious problems, as the euro has demonstrated. The real problem is anonymity which allows criminals to collect multi-million dollar ransoms without fear of being tracked down and brought to justice.
Why is this a good thing?
The biggest problem
Suppose you are a billionaire. You’ve become familiar with risk assessment, knowing that you can deploy a phalanx of Ivy League lawyers at $ 1,000 an hour to defend your case and break the law.
My God. Digital money not found. No more paying mules to transport money across national borders. Paying foreign law firms to create shell companies to hide assets – private island, superyacht, arms smuggling, drugs, sex trafficking – with untraceable cash. Yum!
Yes, the local tax authorities might be lucky and understand what you did, but in reality they don’t have the expertise. Unregulated digital currencies empower a whole new level of criminals.
Moreover, they have been hacked
Much of the technical interest in cryptocurrencies is due to the data structure of blockchain, a supposedly unassailable storage technology that preserves the history of a particular coin forever. But as we have seen many times, the blockchain may not be hackable, but the supporting infrastructure surely is.
Beyond that, one of these days, quantum computing will leave computer labs and allow the decryption – and rewriting – of cryptographically protected blockchains.
Sorry, Mr. Boris owns your Bitcoin, you don’t. He’s saying it right here.
I have been watching cryptocurrencies for years. I get the attraction. But it is now clear – the shutdown of the colonial pipeline is just the latest example – that they need police services. Anonymity, at least, must end.
I suspect that with the police much of the attraction will disappear. Never mind.
It doesn’t matter how much technobabble surrounds a bad idea. It’s always a bad idea.
Comments welcome. If you think cryptocurrencies are wonderful, tell me, in as few words as possible, why. I listen.