Bitcoin is a radical new technology that we do not fully understand the impact of quite just yet, and most likely, we will not for years to come. As this economy grows, evolves, and has more market participants, the itching question is, how will this affect the political situations of the world? At first glance bitcoin may not seem like much at all, but when you look at bitcoin through the lens that it is independent wealth controlled by no nation-state, there are some interesting questions that are called into play.
Regulation is a moot point
There has been debate about the idea of regulation vs. no regulation and I really think that it is a moot point considering that as private individuals that own bitcoin, we are free to exchange with whom ever we please–no government required. Furthermore, people can protect their identity from any sort of interloping from the State, which means that Bitcoin is a truly free global commodity that cannot be stomped out by any government.
This is not to say that regulation will not effect the market, but rather, the market can exist, and has existed without regulation for the last several years. Moving forward, if there were to be anything that could seriously threatened bitcoin, or their users, there is nothing that is preventing bitcoin users from simply absconding their wealth into the internet, and turning up somewhere else in the world with it. With Bitcoin being recognized as private money in Germany, I see no reason for wealthy bitcoiners to consider tolerating any sort of regulatory intervention and losing a substantial portion of their wealth due to such interloping policies.
Our wealth is assured by math, our freedom is ensured by politics
With the imprisonment of Ross Ulbricht and the discussion of bitcoin red list, there is a very important principal being discussed, it is called a bill of attainder. This is the legal concept of a legislature declaring a group of people criminals or guilt of a crime by virtue of who they are, or how they are identified. What is important to understand is the possibility of having one’s wealth seized in a manner similar to how if you try to spend a forged $100 bill, the merchant won’t recognize the value of that money, they will just take it and turn it in to the authorities–and you will be out $100. By tainted coins that have been used ‘illicitly’ it calls into question the fungibility of all coins–something that would not be tolerated internationally. James Madison explained why bills of attainder are so dangerous in the Federalist #44 stating:
“Bills of attainder, ex post facto laws, and laws impairing the obligations of contracts, are contrary to the first principles of the social compact, and to every principle of sound legislation. … The sober people of America are weary of the fluctuating policy which has directed the public councils. They have seen with regret and indignation that sudden changes and legislative interference, in cases affecting personal rights, become jobs in the hands of enterprising and influential speculators, and snares to the more-industrious and less-informed part of the community.” —James Madison
This legal question has been answered–tainting bitcoin is illegal and unconstitutional. Bills of Attainder are prohibited on three occasions in the U.S. Constitution and also in all 50 State Constitutions. With that being said, things being illegal or unconstitutional has never stopped the government before, so there is no reason it would stop them now. The question is how far will both bitcoin-accepting business and individuals cooperate when various government agencies start tracking coins, their owners, and showing up at people’s doors, threatening them with grand juries, imprisonment, and violence for not cooperating? As much as I would like to think the government would be stonewalled, I also know that the FBI has a long and robust history of acting outside of the law in very illegal ways, and convincing people that cooperation is the only way. It will be interesting to see how governments treats our physical bodies when they cannot seize our wealth.
State Against State
The most important feature that bitcoin offers in terms of regulation, is how states are going to position themselves in what will eventually become a game of State against State. Most interestingly, the U.S. is the one nation that has the most to lose here, when you start to consider that bitcoin can very realistically challenge the dollar’s global reserve currency status. This is perhaps what we are already seeing with bitcoin’s dramatic rise in China, with their government remaining rather quiet on the issue. Perhaps they are exploring the idea of using digital currencies to weakening the United States Dollar’s death grip global commerce–it will be interesting to see.
The most important fact to bear in mind here is that bitcoin is superior for international commerce in totality. It is faster, cheaper, more secure, and has less oversight than any fiat currency or precious metal. This means that bitcoin is inherently economically superior to the USD as a reserve currency, and challenges the exorbitant privilege of United States. As bitcoin grows and incorporates itself in more and more markets, it is going to seriously challenge the worth of fiat money itself. States like Germany that choose to adopt a sensible policy will do well with their admission that they cannot control the currency, and to simply treat it as a private currency. States try to restrict and control bitcoin are just going to shoot themselves in the foot hamper their own commercial activity.
World Citizens Against States
The most powerful political ramification of bitcoin and digital currencies is that it creates a new class of international world citizens–a people who’s wealth and prosperity is not linked to that of boarders or territories. When we consider that 16 countries have inflation above 5% today, why would people ever choose to hold paper that is losing value everyday? When people discover there is a way to protect their wealth against the tyranny of inflation, I see no reason why they would not.
But this calls into question something that is clear for most bitcoiners today: Fiat money is garbage. The only reason it is useful is because the state forces us to use it. That does not make it better in any way, and perhaps it makes people very spiteful. Keynes understood this point, as we can see below:
By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method, they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls . . . become ‘profiteers’, who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished not less than the proletariat. As the inflation proceeds . . . all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless.
These ‘profiteers’ that Keynes speaks of are the bankers that today are richer than they ever have been, despite having caused the economic turmoil that we are all in today. As we move into the future, the gap between the rich and the poor is just going to become more extreme. It is clear that the State has failed to protect its citizens from the destruction of state-sponsored capitalism, and it will be up to the people themselves to find the protection they need from both the State, and from their crony capitalist allies.
Once people come to understand that incredible gains they can personally have from using digital currencies, there will be very little reason to continue using fiat currencies. This will then push forward the crisis of confidence that we are already seeing with governments around the world. The final step to ensuring that these governments crumble into nothing, and that something else can be erected in their place, is when their money simply stops being accepted by people. Once that occurs, there is nothing these governments can do–they will have lost.
Bitcoin is not only a revolutionary technology; it is also an incredible empowering technology. For the first time in generations, there is a new tool that allows for people to make the choice if they want their governments to be in control of their wealth. Bitcoin allows for people to refuse to participate in the madness that has become our economic and political system. It offers us an exit from this corrupt system so that we may build a better, more equatable world where we can assure to one another, and our posterity that theft from the state shall never be some we will tolerate ever again.