Crypto-currencies took centre stage in mid July 2019 when tech giant, Facebook appeared before the United States Senate to answers questions about its upcoming Libra token. Before that the country’s Treasury secretary and the Federal Reserve chairman had given their thoughts about Libra, Bitcoin and crypto-currencies in general, the assessment was grim.
Of course, it was the US president himself who set the ball rolling when he attacked Bitcoin and Libra via twitter. Donald Trump is not a fan of Bitcoin he declared and Facebook needed to establish its own banking charter to kick start its Libra token.
Usually when an unhinged Trump tears into something like that, there has to be something much bigger at stake. Its gets awkward when the usually hostile and divided US Congress actually backs Trump, and goes a step further by threatening legislative action against Facebook’s Libra. Apparently the perceived threat is real and much bigger than money laundering or terrorism funding.
Threat to currency monopoly
The opposition seems driven by fears that Libra and other crypto-currencies will end government currency issuing monopoly. It appears that competition in this field weakens the effectiveness of a country’s monetary policy.
While American politicians tried to make the issue about Facebook’s unsuitability for this role given its unsavory past, Europeans were more emphatic in their opposition. Libra is unwelcome in Europe and they were not big fans of privately issued currency in whatever form. Currency issuing should remain the preserve of central banks was the ominous assertion.
Unfortunately, such a threadbare justification for maintaining the monopoly cannot erode or erase the the practical advantages seen with the use of crypto-currencies to date. For example, the world has about 1.7 billion people who are unbanked despite the presence of financial institutions. Crypto-currencies now offer an opportunity to this long ignored group to finally access banking services.
High banking fees or charges as well as accessibility to financial services are some of the key challenges for those without bank accounts and it is precisely these areas where crypto-currencies hold an advantage over traditional banks.
Indeed as the Facebook executive David Marcus desperately tried to point out during his appearance before the US Congress, people in poor countries just need to own a cheap Smartphone and a basic data plan to access crypto financial services or to make cross border payments.
These are real life use cases and trying to forestall one US company from providing such services will only result in non-US companies or the difficult to regulate cryptos like Bitcoin filling this void. Crypto-currencies are inevitable, whether privately, anonymously or publicly issued, the world actually needs them.
Governments need to come to terms with this reality sooner rather than later and embrace this technology. Moreover, efforts should be undertaken to see how these technologies can be integrated with the conventional financial system instead of shutting them out. In fact, cryptocurrency ecosystem is developing at a rapid pace while emulating traditional financial system with all banking sectors available to cryptocurrency users, like crypto loans, savings accounts, index funds etc.
Legislating against crypto-currencies is akin to putting cart before the horse, it goes against the conventional way of doing things. Any new product or innovation must given a chance to grow and express itself before passing judgment. Consumer protection legislation should only come after this natural process has been allowed to occur.
Indeed fear and cynicism might win votes or elections sometimes, but the same should never be used when making laws or government policies which often outlast elected governments. Instead, sobriety must always take precedence, improved efficiency and consumer experience should be the overriding concern.
Terence Zimwara is a crypto-currency enthusiast, analyst and an advocate for alternative money based in Zimbabwe. The limitations and failure of fiat currencies in his country, Zimbabwe and in many poor African countries has made the case for crypto-currencies and Terence writes articles to highlight this to the rest of the world. He has contributed articles in local and global media well as via his blog temra-temra.blogspot.