A few weeks ago, hedge fund legend Ray Dalio was controversial about a possible government ban on Bitcoin if it continues to gain popularity. In the middle of the big uptrend, of course, his comments were ignored because it was very 2018. Mainly because he made a second comment afterward, which showed a degree of openness by admitting with admirable humility that “he may be missing something” relating to Bitcoin. But is a ban impossible?
We know the world’s governments don’t like cash very much. Tickets are still being printed, of course, but it’s something that is made non-binding. It’s not just a question of cost. The problem with cash is control. With a cash-based economy, it is very difficult to get valuable data. In other words, it makes informality easier. On the other hand, it is the preferred medium for criminals because of its non-traceability. Basically, it’s an oversight problem.
Read Next: The Big Paradox: Is Grayscale Bitcoin Trust Really Bitcoin?
Governments prefer electric money because it is easier to control. Of course we cannot speak absolutely here. Electronic money can be used for irregular activities with or without the help of banks. However, it is one thing to cheat within a control system. And it is quite another to have a system without control.
Now it is very easy to transfer millions of dollars from one bank to another. However, if we travel by air for more than $ 10,000 we will get into trouble with the authorities. One could argue that all of these measures are oppressive because they violate our freedoms. After all, we should be able to do what we want with our money. But still, When we are victims of a crime, we turn to the authorities for protection and justice. If someone steals $ 10,000 from us and is held at the airport with our money, that’s when we stop being libertarians.
Economic informality, lack of banking services and lack of capital control are serious problems and, in general, citizens are asking politicians for solutions. Nobody is a friend of the banks, but the day the loan comes out they become our best friends. Civilization has its cost. And not every organization is depressing. In other words, we cannot assume that all money controls are purely evil.
I have to admit that sometimes I feel that the Royal Spanish Academy often restricts my individual freedom, but I admit that the rules are necessary to preserve the unity of the language. If everyone suddenly started completely disregarding the rules, effective communication would be very difficult.
Well, we talked about the war on cash. But we also need to remember the importance of having legal tender. Because monetary anarchy creates economic chaos. We already have experience with systems of this style. This is commonly known as the free banking system. In such a system there are no central banks or legal tender of the government, and specific government regulations on money are either absent or extremely lax. Everyone can spend their own money and it all depends on the free market. In the 19th century, some countries experimented with this system. The United States, Switzerland, Scotland, Australia, to name a few, have explored this path.
Read Next: Why Are The Rich Getting Richer According To The IMF?
The result was total chaos. In order to avoid the catastrophe of free banking, it is now state policy to introduce legal tender and combat the other currencies. Tickets from a city market can be accepted. Casino chips are fine. A banknote, gift card, or community ciborium can pass without much trouble. But at a certain point or a certain size, the authorities feel the threat.
Ray Dalio is a great history lover. And it’s deterministic by calling. He knows very well that the fate of all these “rogue” coins has always been a prohibition in the past. The free banking system is extremely naive. That is their failure. The idea of separating the economy from the state through an act of social uprising. Why? The dollar is the world’s reserve currency, in large part because the United States is in control of the seas. Suppose an oil bank in the Persian Gulf is attacked by pirates off the coast of Madagascar. Who will control the situation? Roger Ver? John McAfee? Courts, police, military, and regulatory agencies maintain order. Fraud, for example, is our daily bread in their free banking system. There is no economy without (enforceable) laws.
What could friend Ray Dalio be missing? Well, the fact that Bitcoin isn’t actually a currency. Bitcoin is an asset. And with the advent of institutional capital, it will soon be too big an asset to fail (“Too Big to Fail”). All of these Bitcoin investing funds are actually funds of funds. This means that in a very short space of time, millions of people will have Bitcoin in their portfolios, directly or indirectly.
It works like this. I will give a little example. Microstrategy has a lot of bitcoin. BlackRock is a shareholder in Microstrategy. The vast majority of retirement funds in the United States have money with BlackRock. Municipalities, trade unions, foundations, etc. That means political power. Suppose a senator proposes a bill to ban Bitcoin. In a few minutes the price drops. On the same day, the same senator receives a phone call with a very clear message: Don’t mess with pensions.
Read on: How Much Can Bitcoin Price Be?
Bitcoin, the asset, won’t have that many problems. Bitcoin, the commodity, won’t have that many problems. But Bitcoin, the currency that fiat money seeks to abolish to separate state and economy in a libertarian revolution, is going to have a hell of a problem. The good news is that there will be more people like the CEO of PayPal or the CEO of Bakkt than people like Roger Ver to testify at the Bitcoin-related congressional hearings.
He often feels that the problem isn’t Bitcoin, but the narrative used. For example, many say that Bitcoin is an extremely safe currency, a “safe haven”, an “alternative to the dollar”. In this case, its critics argue that it is a terribly unstable and therefore inefficient currency because of its proven volatility. But if we speak openly and admit that Bitcoin is a very volatile asset, everything would change. Indeed, this explains its great profitability. And this is exactly why it attracts so many investors. We’ll win most of the debates. Why should we fight the dollar? Why fight the system? Why is it so important to use the term “currency” through thick and thin? Bitcoin is bitcoin. Better to build than destroy. Let’s make love, not war.