Time to Ban Private Cryptocurrencies

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When the Bitcoin craze first began, my reaction as an unreconstructed progressive was that this whole idea was a scam and an invitation to abuse. Bitcoin serves mainly speculators in Bitcoin itself, fraudsters, criminals, and now extortionists. Its benefit to the general public is minuscule.

Bitcoin is a vivid example of how libertarians get so much wrong. Crypto is the high-tech successor to the chaos of “free banking” in the 19th century, when any crook could open a bank.

Recent events have only confirmed these misgivings.

Libertarians love crypto because it is the ultimate free market and ends the “government monopoly” in creation of money. That’s precisely what’s wrong with it.

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Supposedly, cryptocurrencies save users money by ending the “transaction costs” of paying by check, credit card, Venmo, etc. But unless you are stupid and like paying extra fees, those costs are trivial compared to the criminal uses of Bitcoin and the larger costs in the destabilization of the financial system.

Now, the libertarian crypto fantasy has backfired, as government agencies, in response to the recent epidemic of ransom hacks, have had to take on new powers to track down the ransom gangsters and hack into their crypto accounts to get some of the money back. If you like increased police powers and massive disruption of critical systems, you can thank Bitcoin.

Sorry, but it’s good and necessary policy for governments to have a monopoly on creation of money. Yes, private banks do “create” money when they extend credit, but that money creation is regulated and monitored. Even cash transactions in excess of $10,000 are tracked and monitored for fraud and criminal activity.

If we want the benefits of digital currency transactions without the risks, one idea discussed at today’s hearing of the Senate Banking Subcommittee on Economic Policy, called by Elizabeth Warren, is to create a Central Bank Digital Currency that would be operated and governed by central banks such as the Fed, and available for use by the general public. See more detail here.

Privately created and unregulated cryptocurrencies should not be regulated, as some have suggested. They should be banned.

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