Could We See The Berlin Wall Of Bitcoin?

One of the many motivations for creating the original Bitcoin was that it would give the world a currency that was independent of major government control. For people like ShapeShift founder Erik Voorhees, who spoke eloquently recently at the global blockchain investor community’s annual conference, CFC St Moritz. For Voorhees, this was more than just a detail in the fine print. It was a fundamental philosophical foundation, the raison d’etre for the creation of Bitcoin currency in the first place.

Yes, there are all sorts of rational arguments for Bitcoin – after all, it is so much better suited to computers and the internet than fiat currency ever was. But underneath all these rational reasons, the real thrill for a whole trench of Bitcoin and crypto purists, was the fact that for them it is beyond the reach of the ugly big government interference.

According to Voorhees, markets are an expression of freedom, money is an expression of the human psyche, and the government that runs our fiat currency is an expression of unacceptable interference in our private lives. Voorhees points out that half of almost every transaction involves fiat money that is ultimately controlled by the government, and this means that the government is involved in half of all our activities, which, he says, can never be a good thing.

Of course, the state is not very good at managing things. That’s why Soviet Russia gave you the option of three types of shoes, and the Western equivalents were orders of magnitude more.

For those on the Big State side of the argument who observed this Bitcoin purism but were not convinced by it, they see Voorhees as some sort of paranoid with a borderline conspiracy neurosis.

After all, the Big State argument runs, we sometimes need the state and the state sometimes needs us. Especially when there is a real threat to its existence. Pearl Harbour, or a Viking invasion, for example.

The king has always taxed the people to fund the army to protect the people from marauding invaders. That was the deal, since the first millennium. Our security comes from trust in authority, and that is the agreement we all make as citizens.

But our consent to the big state authority is dependent on an unspoken license, which in turn is dependent on the state acting in good faith and a certain degree of transparency.

And it seems that recent years will have deeply challenged the nature of this license.

Bitcoin purists point to a number of examples, but COVID-19 is as good as any. They see it as an exaggerated form of fear.

Not the real fear of Viking invasion that warrants taxes for protection. But an exaggerated fear, fueled by corrupting scientific methods, minds and modeling, to make their populations compatible.

They point to the COVID-19 variants like Omega, which are predicted to cost millions of lives but left the population of Africa and everywhere else largely untouched. And these were predictions that could not be replicated by financial modelers outside the public community of researchers running similar software.

Bitcoin purists see democratic nations terrorizing their populations to create the greatest restriction on human liberties ever imposed in peacetime. Freedoms, like who you can take to bed for the night, who you take a drink with in your own home, not to mention when and how long you can leave your home and what you can do in that hour of daily relative freedom.

There were the ethical issues of denying young children education because of their contraction of COVID-19, which posed no threat to their own health but could endanger the health of their elders; this went without so much as a raised eyebrow in almost every democratic country.

And, say the Bitcoin purists, at the end of this unprecedented experiment in authoritarianism, we have no clear data that it was worth the sacrifice. Sweden against China? Did the authoritarian approach save any lives? Or did it actually cost an awful lot more in exaggerated deaths, as many now believe?

Not to mention the COVID-19 monetary policy, they say, for the money printed to deal with the shutdowns, which in turn fueled inflation and devalued everyone’s savings. Voorhees says “you can consider that if you have an inflation rate of 8%, your money is being canceled at a rate of 8% per year”.

And with greater distance on the COVID-19 years comes greater clarity and understanding.

Previously trusted scientific institutions lost their luster of authority and with it their license to operate on our behalf. Take the World Health Organization, which many mothers still look to for guidance on how to sterilize their baby’s milk bottles: The lengths to which scientists had been politicized shocked those in the scientific community and beyond. An organization that claims to promote health, keep the world safe and serve the vulnerable seemed to be doing the opposite, making the wrong call at every turn.

But you don’t just have to look at NGOs to see wrong calls and cover-ups.

The prevailing sentiment until just a few months ago was that anyone who talked about a COVID-19 lab leak was a conspiracy theorist and if they persisted they should be shut down with a cancellation of their career, livelihood and status.

Such views were considered racist in origin, and no right-thinking person should be allowed any platform outside the lunatic asylum.

This position against “lab leaks” was endorsed by the second highest office in the United States. In April 2020, US Health Chief Dr. Anthony Fauci addressed reporters at a White House press conference, pointing to the paper as justification for his belief that the lab leak theory was a far-fetched conspiracy. Fauci did not acknowledge his own role in the commission of the paper and feigned ignorance of the identity of the authors.

Now science seems “settled,” or at least clear, that the lab leak is the most likely origin of the virus, and all talk of a racist conspiracy theory is swept under the rug.

In all these twists and turns, the fallout is a loss of license for our leaders to make decisions on our behalf about how we conduct our lives.

We see that in France there are riots when the license expires; also in Holland and Israel, where social unrest also challenges the weapon tactics, and many other places. The license to carry out Big State coercion is on notice.

The big state goes to crypto

And then we come to crypto and CBDCs, or central bank digital currencies.

In CBDC, say the purists, we have something that looks and smells like crypto, but is actually an organ of the big state.

It must be especially galling for Voorhees and the Bitcoin purists to see so many of the elements of Bitcoin being appropriated by the very forces that bitcoin was designed to deal with.

All the more since the purists say that all the crashes of crypto have not come from pure crypto games, but rather from crypto as an intermediary for centralized excesses.

Purists are also quick to point out the new dangers inherent in CBDCs.

Never before has it been so easy for a state to disable your money. In fact, they can turn it off with a coin just like an immobilizer or a smartphone can be turned off. Or, as Voorhees points out, it may force you to use it before a certain date, or when it may or may not be used. All via smart contract control of the wallet. And this raises all sorts of questions.

In China, if you support the wrong party or say the wrong thing, they can fine you even easier than paper money. This is already happening.

Will it happen in the West?

Ah, say the Bitcoin purists, given the history of following Chinese tracks, of the handling and epidemiology of COVID-19, and the penetration of Chinese soft power into the Western systems, one thing is inevitable.

The West will follow Chinese leadership.

They feel that if we start issuing CBDCs, it is only a matter of if and not when our democratic western states start punishing us for a list of violations. If saying a virus started in a lab in China is a hate crime, the scope for control is limitless.

But, say the Bitcoin purists, there is an even more frightening manifestation of the Big State, and it is already here doing its damage.

Closing down a business you don’t like.

Around 2014, American banks began to judge their customers not from a financial point of view, but from a reputational or even aesthetic one. This was an Obama-led piece of legislation dubbed “Operation Choke Point”. Essentially, regulators threatened to shroud a bank in red tape and investigations if it did not cut banking services to certain types of customers. Generally, those who had a profile the administration believed did not support the right liberal values.

So for over two years, the nation’s gun dealers, pawn shops, tobacconists and moneylenders were shut down due to pressure from regulators. Of course, the original intention was somewhat different; to get rid of fraud, which was seen as discontinued or enabled by all types of stores listed above. But like many high-minded projects pursued with too much zeal, the real casualties were very different from the intended goals. What was closed were the Mom and Dad shops, small legitimate businesses, not the syndicated scammers Choke Point was set up to kill.

Under Trump there was a repeal of these laws, but with Biden they came back into the frame again. Choke Point 1.0 has been updated to Choke Point 2.0.

The new targets were not the brick and mortar businesses of 2014, but the crypto businesses of 2023.

Some in the crypto community see the fall of Silicon Valley Bank as being triggered by Choke Point 2.0

Certainly, the European crypto community is making the most of having a more crypto-friendly outlook. The chart below shows Europe’s gain on the US in this domain.

But if the banks start freezing out crypto and crypto starts funding its own kinds of projects, we can foresee a kind of cold war between big-state and blockchain purists.

Just as the Cold War saw Warsaw Pact countries separate from NATO countries as two separate societies, doing very little business across the divide, could we see a two-community business world emerge?

Exactly how it works and who wins and who loses is anyone’s guess. Either way, crypto in its big state or purist form will have a significant role to play.

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