Written by Malik Corbett
As the proverb goes “history doesn’t repeat itself but it does rhymes” and the same goes for the history of money.
Many believe that the ability for anyone or entity to create a digital currency is something out of sci-fi movies. However non-fiat money (money not issued by a government) is not a novel idea. In fact, from 1863 to 1935, National Bank Notes were issued by private banks throughout the US. There was a protocol (e.g. official procedure and rules governing affairs of the system) in which banks had to obtain a federal charter from the US Treasury. Banks with a federal charter would deposit bonds in the US Treasury. Once deposit was made with the Treasury then banks could issue banknotes worth up to 90 percent of the value of the bonds. In turn, the federal government would back 100% the value of the notes issued. This in-turn created a reflexive cycle in which the more banks that opened across the country, the more demand for U.S. government bonds. However, banks were not the only ones in U.S. financial history to create money. Corporations such as railroad companies as well as coal mining and lumber companies issued money to pay their workers.
Look to the East
With the innovation of public blockchain based cryptocurrencies such as bitcoin, it seems that new forms of money will arise. In fact, Asia has been steps ahead of many western countries. For example, China has incorporated blockchain and cryptocurrency as the centerpiece of their global ambitions (read more here). To that end, China has created an alternative payment system to the global SWIFT standard called The Cross-Border Interbank Payment System or CIPS. To be clear, China’s goal is nothing short of upending the U.S. dollar’s dominance as a global currency reserve. Furthermore, according to a recent study 92% of people in China’s biggest cities use apps like WeChat or Alipay as a primary method of payment.
However, China is not alone. The Monetary Authority of Singapore established a framework for regulation of cryptocurrency and blockchain technology. China is not the only country with ambition to bring their country into the future of blockchain and cryptocurrency, Prime Minister Shinzo Abe of Japan has said he wants 40% of payments to be cashless by 2025. While Japan is late to the party, South Korea has been at the center of the crypto revolution. Even while the world grapples with the Coronavirus, The South Korean National Assembly passed new legislation in March providing a framework for regulation and legalization of cryptocurrencies and exchanges.
Public Cryptocurrency as On/Off Ramps
The impact of Bitcoin and cryptocurrencies on finance cannot be understated. The innovation of blockchain has unleashed endless possibilities for many companies and whole industries to integrate the technology, creating new business models never seen before. In many ways blockchain technology is similar to cloud computing revolution in that an individual or entity could upload a program into a blockchain smart contract and have it run autonomously. In fact cryptonetworks can be viewed as computational ecosystems for developers, entrepreneurs and businesses to build value on top of.
These ecosystems have the potential to be on/off ramp in an ever increasingly protectionist environment which we haven’t seen since the early 1900’s. As the current global recession accelerates the formation of a new world order, cryptocurrency markets could play an important on/off ramp mechanism for moving money around the world. The next 12-18 months will be an extremely important time for the blockchain industry and cryptocurrency markets.