Like truth, the best test of a cryptocurrency should be its ability to get itself accepted in the competition of the marketplace.
Cryptocurrencies should be welcomed for challenging the government’s monopoly of money. All experience teaches that monopoly is a narcotic and competition a stimulus in satisfying consumer wants.
Under the U.S. Constitution, liberty is the rule and government restraints are exceptions justified only to prevent material anti-social consequences. Cryptocurrencies would have been still born without substantial consumer demand for greater financial privacy, discount fees for international money transfers, or a store of value unthreatened by politically motivated expansion of the government’s money supply.
The Federal Open Market Committee, for instance, expanded the supply by $1.75 trillion in March 2009 in QE1 (quantitative easing), by another $600 billion in November 2012 in QE2, and by an additional $1.7 trillion from September 2012-October 2014 in QE3, a staggering increase exceeding $4 trillion all by government edict.
Cryptocurrencies are not trouble-free. But neither is the dollar. Cryptocurrencies can be the staples of Ponzi schemes. But so can the dollar. Cryptocurrencies can be used in money laundering. But so can the dollar. Cryptocurrencies can be employed in human trafficking. But so can the dollar. Cryptocurrencies can be used in drug trafficking. But so can the dollar. Cryptocurrencies can be used to evade taxes. But so can the dollar. There is no sound reason for saddling cryptocurrencies with heavier regulation than is the dollar.
They may facilitate evasion of criminal prohibitions more effectively than does cash or wire transfers. But the Constitution does not permit the government to compel citizens to arrange their lives for the convenience of law enforcement. No law could require all private homes to be constructed with glass to enable the police from public sidewalks to espy marijuana cultivation. No law could outlaw encrypted communications to facilitate the investigation of criminal activity. No law could prohibit leaning quantum mechanics to deter illegal nuclear arms proliferation.
The crescendo of attacks on Bitcoin and other cryptocurrencies comes from the usual suspects, i.e., banks or federal regulatory authorities whose profits or powers are jeopardized. JPMorgan Chase, Bank of America and Citibank have prohibited their customers from using credit cards to purchase virtual currencies.
Despite government and bank hostility, cryptocurrencies continue to flourish. They are attracting customers from South Korea to Venezuela — the latter to escape the devastation of hyperinflation. They are destined to persist. Governments invariably debase the currency to lessen the burden of repaying government debt. They also seek to monitor citizens and invade the right to privacy by tracking their currency transactions. Cryptocurrencies can be safeguards against such hazards or encroachments on liberty.
They should be entitled to compete for the patronage of customers on an even playing field with government decreed money. If cryptocurrencies fail, the failures should come because of an absence of customer demand, not because of government prohibition. One Prohibition Era was one too many.