Cryptocurrency: The Decentralized Future of Money?

July/​August 2016 • Policy Report

For centuries governments have held tight monopolies over money, giving them tremendous power over their citizens’ lives. But now, cryptocurrencies like Bitcoin could upend this relationship between money and government. Although digital currency itself is nothing new — think PayPal or credit cards — Bitcoin’s decentralized, anonymous, peer‐​to‐​peer exchange makes it something truly revolutionary. At a conference organized by Cato’s Center for Monetary and Financial Alternatives, “Cryptocurrency: The Policy Challenges of a Decentralized Revolution,” over 200 people gathered to discuss the future of this technology.

Jerry Brito of the Coin Center, an organization dedicated to educating the public about cryptocurrencies, opened the day with an explanation of what Bitcoin is, the importance of blockchain, the technology which underlies it, and where regulation of cryptocurrencies currently stands. “Bitcoin is the world’s first completely decentralized digital currency,” said Brito. He warned that the United States’ complicated web of regulations, which are different in every state, could cripple cryptocurrency’s spread and leave U.S. companies fleeing to other countries which are embracing the technology, like the UK.

This led into a panel discussion of some of these state laws regulating the transmission of money, featuring Margaret Liu of the Conference of State Bank Supervisors, Marco Santori of Global Policy Counsel for Blockchain Inc., Melanie Shapiro, the CEO of Case Wallet, and Dana Syracuse, an attorney who helped draft New York’s BitLicense laws.

Commissioner J. Christopher Giancarlo of the Commodity Futures Trading Commission delivered the keynote address, praising blockchain technology for its potential to confer “enormous” benefits on consumers and regulators alike. He recommended that policymakers follow the “first, do no harm” approach that regulators once took to the internet in its early days. “Once again, the private sector must lead,” he said. “Regulators must avoid impeding innovation and investment. Instead, they must provide a predictable, consistent and straightforward legal environment.”

Numerous speakers stressed blockchain technology’s potential to secure the transfer of much more than merely currency — stock, houses, copyrights, votes in elections. “I think it’s more disruptive than the internet,” said Patrick Byrne, founder and CEO of Over​stock​.com. “Ultimately the internet was about moving information around frictionlessly, but this is about moving value. That means there’s all these centralized institutions civilization has accumulated for thousands of years, like barnacles on our hull, that are going to be disrupted.” Byrne recently resigned from his several companies on medical leave, and had canceled all his upcoming appearances except for Cato. “The first place I ever started to make donations to, in the ’80s, when I was a college student, was this placed called Cato — I was sending $10 a year, $25 a year,” he said. “It began and ended with Cato, for me.

Later panels featured representatives from various companies developing financial services products using blockchain, and monetary experts discussing Bitcoin’s use as a currency. Cato’s George Selgin, who organized the conference, suggested that cryptocurrency could eventually be used to enforce a monetary rule to replace central banks’ discretionary power. Another panel discussed privacy issues surrounding blockchain, with Cato’s Jim Harper making the case that Bitcoin’s benefits far outweigh any supposed risk of exploitation by criminals.

Rep. Mick Mulvaney (R-SC), vice chairman of the Subcommittee on Monetary Policy and Trade in the U.S. House of Representatives, delivered the conference’s closing address. He praised Bitcoin’s potential for popularizing decentralized currency, quoting a member of the German parliament’s finance committee who said in 2013, “I have long been a proponent of Hayek’s scheme to denationalize money. Bitcoins are a first step in this direction.” Mulvaney marveled at this, calling himself “stunned” at the prospect of Bitcoin opening discussions of “denationalizing” money among members of the European government. “What a tremendous opportunity,” he said.

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