It has been a great libertarian idea that Bitcoin could be established as independent currency which could be used globally outside of the central banks’ systems and governmental control. It had all the flows from the start which clearly made Bitcoin unacceptable for global transactions.
Bitcoin had unintended consequence. It begun a new quest by banks, independent fintech companies, governments and above all central banks. The idea is simple. The technology behind Bitcon, blockchain, can be used for a government and central bank controlled crypto currency.
This idea and the dawn of crypto currencies do have the ability to reshape the world not even envisioned by George Orwell or the creators of sci-fi films. The crypto currencies based on blockchain technology could permit the governments and central bankers to exert a full control over all financial transaction and money movements.
This idea is further promoted by the current discussion if physical money, notes and coins, have to be phased out. Electronic payments and finally crypto currencies would take their place. The formal discussion targets criminals and makes people believe that once physical money is gone, crime can be controlled and combated more efficiently. At the current moment the criminals are even able to trick central banks to transfer money to illegitimate accounts.
Anyone who bothers to look at the current credit card fraud, electronic money transfer fraud and direct successful cyber-attacks on banks will realise that crime is part of the cyber age and that criminals have discovered more than one way to thrive in the cyber world. This means that removing physical money would not really impact the criminals.
Control can be exerted with crypto currency. Investors and ordinary tax payers will become fully transparent allowing insight into the behavioural side. Every payment can be verified and followed. The total control over the tax payers freedom will be possible.
The ultimate idea is to create a system which can survive without boom-and-bust cycles. The utopian phantasy depicts financial world with no crises and full macro and micro control of the financial systems.
Banking system as we know it today will stop to exist. Commercial banks will not be necessary to process payments. Accounts could be held directly with the central banks. Investments could be facilitated directly from central bank account via digital connection between two parties without the need for one or numerous intermediaries.
Let us follow this utopian idea till the logical end. Brokers could become obsolete as the electronic platforms based on blockchain could verify the owner of the assets and the purchaser. The transaction would be secure and virtually free of charge. Banks and credit card operations could be largely phased out. The software based on central bank account keeping could easily transact the volumes of payments.
Our financial system would change for ever. Financial sector will do anything to survive and thrive in this environment. Thus not all the efficiencies of the blockchain technology and the crypto currency will come to fruition.
Tags: Federal Reserve