The Fight Over the Future of Money

Recent news that Iran shut down two crypto mining farms, another Indian crypto exchange ceased operations over regulatory uncertainty and its inability to obtain banking services, and Russia is evolving its position on crypto emphasized to us that the swift backlash against Libra by U.S. and European regulators is part of the broader fight over the future of money.

  • Iran’s Energy Ministry cited destabilization of the power grid as its justification for closing the mining sites and seizing their equipment (the government subsidizes electricity in Iran), although the country’s unfriendly stance to date on crypto activity — including a draft bill that would prohibit crypto’s use for payments — could lead to the conclusion that Tehran’s stance toward crypto is wrapped into its strategy to mitigate the impact of a currency crisis exacerbated by the recently-reestablished U.S. sanctions.
  • India’s continued anti-crypto stance (it recently proposed a bill that includes a potential 10-year prison sentence for anyone involved in crypto activity) also is related to the government’s concern about the impact on the Indian rupee if cryptocurrencies are allowed to be used for payments.
  • The Governor of the Bank of Russia last month said that it would consider allowing a gold-backed cryptocurrency, but stated “We do not see the possibility that cryptocurrencies could act as money surrogates.” Moscow continues to debate and develop official crypto regulations for the country.

When looking at the similar positions of these three governments on crypto’s use as a payment system), we also note that all three countries have explored the establishment of a national cryptocurrency that would be managed by their central banks. This leads to the question: are the crypto policies of these countries (and others who have not embraced digital assets) really based on substantive concerns related to their use for illicit activity, issues related to currency rates and economic stability, or simply an unwillingness to allow for the transition of control and authority away from central banks toward a less-centralized economic system?

Taking a leap and looking at the hostile reactions of regulators and economic leaders to Libra from that same lens, we wonder whether Libra will force the question about the future of money in a way that Bitcoin has not. Will the fight over Libra engage global monetary authorities in a way that compels them to decide how they will fit digital assets into their economic structures? That might be a leap too far at this point, as it seems unlikely that the heads of central banks will willingly open their arms to a new asset class that could diminish their control over their national currencies, but given the types of questions being teed up on Libra, we will not be surprised if this debate further opens up broader discussions about the nature of money and where digital assets fit. With the growth of blockchain and crypto lobbying in Washington DC, we hope and expect that there will be a good volume of voices advocating on behalf of digital assets.

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