Without the crypto-libertarians, cryptocurrencies would never have taken off.Ĭrypto has undergone two phases in its 14-year history and is entering the third (Danielsson 2022). While they remain a small fraction of crypto promoters, they have been critical to its success. Satoshi Nakamoto's original Bitcoin paper (Nakamoto 2009) argues that technology can solve the problems of the existing financial system, and the adoption of Bitcoin and other cryptocurrencies has been driven by techno-libertarians who see crypto as the solution to a corrupt and inefficient financial system. The phases and politics of cryptoĪt their essence, cryptocurrencies are a political movement. The private sector crypto proponents need to decide on whether to embrace the mainstream banking system or stay as far away from it as possible, while the authorities have to decide whether to embrace, ignore, or extinguish crypto. ![]() The threat of payments made with tokens, overseen by smart contracts and not under the control of any national government, has compelled many authorities to enhance the payment system and remains the primary motivator of central bank digital currencies.Īlong the way, both the public and private sectors face major challenges. The competition from crypto has forced the public and private sector incumbents to address the system's inefficiencies and rent extraction, with Brazil's PIX an excellent example of what the financial authorities can accomplish when sufficiently motivated. While that suited the incumbents and the financial authorities, it also meant a highly inefficient payment system and significant rent extraction.Ĭryptocurrencies threaten that cosy little world, and the existing setup has come under considerable challenge, witnessed by the financial system's plumbing becoming worthy of study, as manifested by many articles published here on Vox, like Schoenholtz and Cecchetti (2021) and Belmonte et al. Before crypto, the infrastructure of the financial system, the plumbing that is so essential and usually ignored, remained a niche area of study. ![]() Regardless of how that plays out, cryptocurrencies are set to leave a fine legacy, having had a considerable and positive impact on the financial system. Crypto supporters disagree on whether crypto should remain true to its anti-establishment roots or integrate into the mainstream financial system, while the financial authorities are unsure if crypto should be extinguished, ignored, or harnessed for good. ![]() Cryptocurrencies are as divisive as ever.
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