Crypto currencies have been hailed as the future of money, thanks to it’s decentralized, fast, and global nature (For example, see Saifedean Ammous’ The Bitcoin Standard: The Decentralized Alternative to Central Banking). There are several advantages, which are mainly shortcomings of the current financial system: the global nature of crypto currencies, the independence from political actors, and the efficiency, for example to settle large sums. This is where crypto-currencies promises’ get their first dent: There is no reason why centralized systems shouldn’t be able to catch up and offer similar functionality. Electronic cash, which has been issues by countries such as China, shows that when governments pull together the will to implement improvements, they can be implemented even with the existing system. Europe’s Single Euro Payments Area (SEPA) was a much earlier example of this. However, when it comes to discussing the future of crypto-currencies, many seem to forget why and how currencies were created by governments in the first place.

Governments and central banks play a huge role in steering the economy. While this sometimes does more harm than good (see Turkey throughout 2021), it is still a critical function for many governments around the world. Do we really want to give up that power of governments to influence the economy? Governments are surely no perfect steward of the economy and make mistakes, but it’s still the next best thing. When things are looking down, wouldn’t we want the government to inject some cash (the way it happened during the COVID pandemic)? Wouldn’t we want governments to reduce cash supply, when inflation rises?

But there are much more practical implications. While most citizens will hopefully never have to rely on a government’s deposit security scheme (usually governments guarantee up to 100.000 USD/EUR/GBP to every citizen in case their bank goes bust), this won’t really be possible if the government isn’t in control anymore. Of course, you might say that with crypto we don’t need banks that then cannot go bust, but we have seen enough incidences in which crypto currencies were stolen or crypto exchanges were compromised and billions of dollars in value was lost. Giving governments more control over the financial system actually has huge advantages for consumers across the world.

This is not to say that crypto doesn’t have any value or should not be used. From NFTs to cross-border transfers, crypto will probably make a lot of processes better, faster, and cheaper. But if we really wanted to replace governments’ currencies, we would be willing to give up quite a significant amount of safety and security. I am not sure this is what we as a society would want.

P.S. There is an additional debate to be held on how decentralized crypto really is and who controls it and how decisions are made. But that is a discussion for another time.