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The Establishment Panic at Cryptocurrency

When Kingsley Amis encountered the works of D. H. Lawrence, he was left unimpressed by yet another great denouncer and missionary the English send “themselves to tell them they are crass, gross, lost, dead, mad and addicted to unnatural vice.” With little charity, Amis suggested leaving the didactic novelist on “on his pinnacle, inspiring, unapproachable and unread.”

Leaving aside matters of inspiration, much the same can be said of Hillary Clinton, failed US presidential candidate, tenured alarmist grump, ever worried about inroads being made into establishment power by rogue elements keen to snatch the crown of power. One of them, in her mind, is the threat posed by cryptocurrency.

During a panel discussion at the Bloomberg New Economy Forum in Singapore, she made the following comment worth quoting in full: “One more area I hope nation-states start paying greater attention to is the rise of cryptocurrency because what looks like a very interesting and somewhat exotic effort to literally mine new coins in order to trade with them has the potential for undermining currencies, for undermining the role of the dollar as the reserve currency, for destabilising nations, perhaps starting with small ones but going much larger.”

The remark has every threat imaginable in the Clinton universe: the potential dethronement of the almighty dollar, cornerstone and guarantee of US power; the attack on the nation state; the faux exoticism. For other figures of the establishment, cryptocurrencies pose a regulatory nightmare, able to be used for money laundering, people smuggling and drug trafficking. The fact that all this takes place very readily with standard currency transactions is another one of those inconvenient truths that does not disturb the narrative of dystopian terror.

Other political figures are also jittery at the inroads of crypto. India’s Prime Minister Narendra Modi, steeped in his own brand of creepy paternalism, told a forum hosted by the Australian Strategic Policy Institute on November 18 that it was “important that all democratic nations work together on this and ensure that it does not end up in the wrong hands, which can spoil our youths.”

Such a mood has not been helped by India’s Supreme Court decision from March last year, effectively invalidating a 2018 central bank order prohibiting banks from dealing in cryptocurrencies. The ruling saw a hot-flushed boom in investment.

Undeterred, a Modi government official told Reuters in March that consideration was being given to a new bill that would ban cryptocurrencies and criminalise possession, issuance, mining, trading and transferring such assets. The target here is private crypto assets; the preference is for blockchain technology.

Despite the severity of this bill, Finance Minister Nirmala Sitharaman was also throwing a few crumbs of reassurance at worried investors. “I can only give you this clue that we are not closing our minds, we are looking at ways in which experiments can happen in the digital world and cryptocurrency.”

El Salvador has already carved out a space in the nation state jungle for crypto, making it legal tender in September. Through mid-November, the country hosted Bitcoin Week, and the Minister of Economy, María Luisa Hayem, was enthusiastic in telling the Adopting Bitcoin conference how her government “is committed to innovating” and expressed pride at adopting the digital currency. Rosily, she proclaims that the “currency has given, in a short time, access to payments and services that Salvadoreans didn’t previously have.”

The move had been more than frowned upon by those agents of poverty, the World Bank and the International Monetary Fund, with the latter warning of “macroeconomic, financial and legal issues that require very careful analysis” arising from adopting such currencies. But even central banks, threatened by this decentralising digital march, are coming around, though there is a worry that such deposits might exacerbate financial instability.

In Australia, the Commonwealth Bank has ventured into the crypto market in partnership with the digital currency trading platform Gemini and blockchain analysis firm Chainalysis, developing an app enabling customers “to buy, sell and hold crypto assets.” Ten crypto assets will feature, among them Bitcoin, Bitcoin Cash, Litecoin and Ethereum.

The move is far from cavalier, and even slightly dull. The CBA wants a share of the crypto pie and thinks it can reassure customers it can do so in a regulated system. Having one dedicated exchange platform will mean that digital currencies from other exchanges will not be permitted to be brought in. Close monitoring is promised.

Clinton’s fears and warnings about unscrupulous digital barbarians running amok find themselves in cold isolation. The current cryptocurrency market is worth $2 trillion, a remarkable thing given that crypto only came into being in 2009. The market capitalisation of digital assets, according to figures from JP Morgan, has boomed from $200 million by 2019’s end to the current figure of $2.6 trillion.

True, such digital assets are becoming a threat, but this will come from the voracious appetite the minting and circulation of such currencies command. Bitcoin and Ethereum, together, consume as much electric energy per annum as Indonesia. It leaves a generous carbon footprint along with a growing electronic waste problem. Now that’s a worry.

 

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21 comments

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  1. Kate Ahearne

    Thanks, Binoy.

    I wish I could understand it all. I notice that you have just one negative thing to say about crypto currencies, in your last paragraph. It’s a very big thing, though.

    And as for Kingsley Amis and D. H. Lawrence… Kingsley Who?

    And Hillary Clinton, ‘failed’ presidential candidate? Please say that you didn’t prefer Donald Trump.

  2. Michael Taylor

    Hi, Kate.

    I can provide you with the sense of relief by declaring that Dr Binoy is certainly no Trump lover. 😀

    It’s just that he takes a centrist position when discussing politics/politicians in his articles.

  3. Kate Ahearne

    Hi, Michael.

    That’s a relief! Now, what can you tell me about this ‘mining’ thingy? Making money out of thin air, as far as I can see. A lucid explanation from somebody would be most welcome. I’ve consulted Professor Google, but no cigar.

  4. RomeCharlie29

    I too wish I understood. I find crypto currencies impossible to get my head around, especially the concept of mining them and the use of electricity in that process. Then there’s the ‘ growing electronic waste’ problem. What does that even mean? I note the cafe bar at my local market now advises it accepts payment by Bitcoin. My 76 y.o. brain comes up blank.

    Meanwhile Hilary Clinton as failed presidential candidate is surely a fact, not indicative of a preference.

    Please Binoy explain these crypto currencies in words of one syllable.

  5. Phil Pryor

    Bert Lawrence could write, in parts; who is that other chap? Anyway, colourless lipstick to do up a sketch on “fake money” is useless, if harmless. As one who has had little money in excess, or for “discretionary waste”, I’d like to know more. Crypts seemed interesting once, as in jokes (From the gloom of the crypt of St. Giles…, came a scream that…) no more) . As for Trump and Clinton H, who gives a fat rat’s ring now, as long as they expire and bring us all relief. Two awful candidates do not suggest we need retrospectively seem to prefer one. About the dud money, does it seem absurd that “mining” is environmental filth, vandalism and modern ingenuity gone mad??

  6. Michael Taylor

    Hi, Kate.

    Mining means making your own Bitcoin. It’s not an easy thing to do, as it uses more electricity than a household can cope with.

    I was listening to Radio National last year where Phillip Adams was interviewing a bloke who wrote a book about cryptocurrency. He told of the sad story of a uni student who wanted to buy a pizza but had no money, just a load of Bitcoin so he phoned around to find a pizza bar that would accept his Bitcoin.

    He eventually found one.

    If he had kept his Bitcoin, at the time the book came out, he’d be worth $1.6 billion. Given that the price of Bitcoin has quadrupled since then he’d now be sitting on $6.4 billion.

    I bet you he hates himself.

    I bought 0.1 of a Bitcoin and sold it when the price went up by about 20% to $17,000 so I made a very small profit. They are now worth about $95,000. My bad. ☹️

  7. Roswell

    Michael, if it makes you feel any better, the price has dropped to $82,000.

  8. Kate Ahearne

    Michael,

    ‘Mining means making your own Bitcoin.’ Recipe, please.

    But seriously, I just don’t get it, and I’m delighted to know that I’m not the only old fogey who doesn’t. There’s comfort in company.

    About Hillary Clinton… It was the bit about her being a ‘tenured alarmist grump’ that got my attention.

  9. Michael Taylor

    Oops, I’d missed that bit about Hillary.

    Just as I wish Bill Shorten had won the last election, I wish Hillary had won the 2016 election.

    But back to cryptocurrency, I think it’s the way of the future. I hear that if you use Bitcoin to buy a house, you can avoid going through a bank and paying all the fees. It’s over my head, so I don’t know the exact details.

    As for mining, I wish I knew how to do it. 😁

  10. Michael Taylor

    Roswell, I would have preferred it if the price had dropped to 82 cents. I’d by a hundred of them.

  11. Kate Ahearne

    Seriously, though. On a ‘need to know’ basis, we do need to know. Are we turning electricity into money as if by magic?

    Quite frankly, the whole thing smells like old fish to me. I, for one, am doubtful, and not only because there is so much that I don’t know/understand. That amount of electricity is frightening, just for starters. The fact that so few people do understand is another worry. And clutter in the cloud?

    Binoy,

    My biggest problem with your piece is the way it so airily assumes that your readers have some idea what you’re talking about. And even more worrying is the fact that this incomprehensible? phenomenon is making such headway in our world. If ordinary people, even those, like me, who have some background in maths and science, are all at sea, we need to be concerned.

    There are lots of other reasons why we should hang onto our cash economy, the coins in our pockets. I’ve probably banged off about that enough lately. Enough to say stuff like ‘poor’, ‘homeless’…….

  12. Michael Taylor

    Kate, me too, to tell the truth.

    Before the pandemic hit I’d use cash for everything. Any coins I’d get in my change would go straight into a money box. When it had filled up – which would be around $200 – I’d take it straight to the bank (I loved using their coin counting machines) and deposit it in a seperate account. Usually at the end of the year I’d have $400, which would be our money for Xmas presents.

    At work when we had our Secret Santa I’d buy a money box, put $10 in it with a note who it was from. When the tin was filled up – and opened – they’d see the note and the $10.

    Ah, money tins, what wonderful things they are.

  13. Kate Ahearne

    Michael,

    Some things need to be rescued from ‘before the pandemic’. I truly believe that cash is one of them.

    I have to confess to doing a lot of online stuff. No cash involved. But bitcoin is a far cry away, according to me.

    Anyhow, I’ve become quite galvanised lately. Before all the ATMs are de-commissioned, I’m going to be hitting them for cash every chance I get (or can afford to). I want to be able to put actual coins into actual hands, knowing that some of those hands need to feel those actual coins in their actual pockets so that they can make their own little economies go round.

  14. Michael Taylor

    Kate, things change and we can’t do much about it.

    I remember when scanning goods at the supermarket checkouts first came in. People were horrified, untrusting of this dastardly computerisation.

    Then we starting used EFTPOS machines with our cards.

    Now people are buying stuff with cryptocurrency.

    But like you, the feeling of cash in the hands is the best.

  15. Kate Ahearne

    Michael,

    Sometimes we need to resist change. At the time, those checkouts cost a lot of people their jobs, and contributed to the concentration of wealth in fewer and fewer hands. If only the German people had resisted the rise of Hitler. (Some did, of course, but most didn’t, and a great many people suffered and died as a result.)

    At the moment we have vile behaviour on the streets of Melbourne, imported from Trump’s America. We need to find effective ways to resist.

    Crypto currency might also be something that we need to resist. First, though, we need to understand how it is created, how it works, and what might be the consequences.

  16. Michael Taylor

    Hi, Kate.

    I think it’s human nature to resist change, unless they are one of the change agents.

    That’s how I found it in the work environment in the public service. Government ministers would treat their departments like pawns on a chess board, and would move them at random.

    The cry of “Not another bloody restructure” was all too common. It was only after I would appoint staff to be the change agents that they embraced it.

    I think, too, that there is massive resistance to cryptocurrency in some countries, while some others embrace it. I foresee that many governments will regulate its power, especially given that it is a means of money laundering. A risky one, but still a means nonetheless.

    I see that the leading crypto exchange in Australia, CoinSpot, now has over two million users. That’s two million more people who know about cryptocurrency than I do.

  17. corvusboreus

    A dose of conservative consideration within the onward progression of implemented ideas is not necessarily a bad thing.
    Employing precautionary principal can help prevent Things like disasters, extinctions, etcetera.

    I reckon ‘liberal’ and ‘conservative’ are terms subjected to similar levels of linguistic abuse as ‘quarantine’ (40 days is a quarantine, 14 is a quatorzine) and ‘decimate’ (conduct a systematic -10% reduction within alotted ranks).

    When I choose to gather evidence and enact deeds that stand between chosen trees which I know are necessary for continued health of local natural functions (eg water filtration and weather generation) and the fossil-fueled machineries employed to corporate vessels to slay them for profit, it is defined an act of ‘conservative activism’ carried out against the ‘forces of progress’ .
    Yet I am oft-derided as being töö progressive by people self-labelling as conservatives.

    Words, huh?

  18. Kate Ahearne

    Michael,

    When it comes to change, each case is its own case. Some things need to change. For instance, some elements in the Catholic Church in Tasmania need to be dragged, kicking and screaming (if needs be) into the 21st century, where it’s perfectly OK to be on the LGBTI+ spectrum, and where it should be OK for schools to welcome and encourage such students to be their natural selves. (A pet cause of mine.)

    In the same vein, electric cars are a great idea. And so on. The changes that were happening in your department seem to have been necessary and good, in which case, encouraging people to become agents of change is also necessary and good.

    On the other hand, some changes are not so great, and need to be resisted. The proposed ‘religious freedom’ bill is one. The proposed voter identification legislation is another (according to me). The nasty new face of extreme right-wing protest as we’ve been seeing it in Melbourne, is another change that needs to be resisted.

  19. Kathryn

    In case people forget, Hillary Clinton was a credible DEMOCRAT who loudly criticised the appalling self-serving REPUBLICAN sociopath, Donald Trump and his inherent profit-obsessed and self-obsessed narcissism! The fact is that Clinton was not a failed politician – indeed, she won the popular vote by more than 2.9 million votes, however – sadly for America – Clinton conceded the 2016 presidential election to Republican Donald Trump on November 9 after media outlets declared Trump had exceeded the 270 electoral college vote threshold needed to win the election and ending the campaign. The rest of the appalling downfall of America under the diabolical Trump regime is, as they say, history! Placing Clinton in the same “basket” as Trump is positively ridiculous – they were polar opposites!

  20. Kate Ahearne

    Kathryn,

    Thanks for your lucid and informed remarks about Hillary Clinton.

    She did win the popular vote, and if democracy was as good as it could and should be, she would have become the first woman President of the United States. What a different world we might all be living in now if that had happened.

  21. Michael Taylor

    I’m hoping like hell that the first female President is Kamala Harris.

    Four years ago I was hoping like hell that it would be Hillary.

    I think Kamala has a better chance than Hillary had as Hillary had a bit of baggage thanks to her nefarious and unfaithful husband. It wasn’t Hillary’s fault, but voters can be quite fickle.

    I’m still disgusted with a poster that the Republicans had: it was a photo of Monica Lewinsky with the words “Voting for the Democrats left me with a bad taste in my mouth”.

    The Republicans stoop very low. I wouldn’t be surprised if they’re already trying to piece together a dirt file on Kamala, but I wouldn’t be surprised if it is empty.

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