The tectonic plates of economic power are being moved by the crypto kings
Sanctions have shown the power of the people who control cash. Oligarchs counting their dollars today have realised that their money is more than just a currency, it’s an operating system.
In the past month, the US Treasury, which issues the American notes and regulates the accounts that trade them, has removed the operating licence for millions of Russians, not just those in the regime.
This has come as a surprise to many. People who thought cash was just a store of value and a means of exchange have been caught short. They’re now looking for other ways to pay and alternatives to horde wealth.
Some have suggested China’s Alipay or the renminbi. That may look good for those angry at Washington, but Beijing is hardly more reliable. We’ve already seen the Communist rulers use the might of the state to silence those who displease it.
It’s hard to see Maos replacing Franklins when they’re not free floating. Many investors will tell you it’s easy to put money into the country but taking profits out or giving control to other jurisdictions can lead to a harsh response.
China’s Uber – Didi – tried to raise money in New York but the Communist Party stepped in to stop it. Forcing them to list in Hong Kong safeguarded them from the risk of others peaking behind the crimson curtain or getting access to the travel data of the red princes. Even some of the richest in the country are face restrictions on their freedom, such as Ant Group’s Jack Ma who found himself detained for a few days until he decided to recant his wrong thinking. And Canada’s Michael Spavor and Michael Kovrig are a reminder that hostage taking isn’t just an Iranian tactic.
So where to go if capitals are now too stifling? Cryptocurrencies look like they may fill the breach. Bitcoin and ethereum are already allowing transactions between sanctioned states, like Venezuela and Iran.
But they don’t just replace dollars, or store value like gold. True, the government is weaker, and the reach of officials whether in Moscow or London is more stretched, but power doesn’t disappear, it shifts.
On our journey from the swamp to the stars we’ve seen this evolution more clearly in speech. We’ve gone from the town square to the printed sheet and eventually to Twitter. The same is happening with cash, it’s just taking longer.
From barter to gold or shells, to tally sticks then paper and eventually to crypto has changed who controls the levers of an economy. Perhaps not the core coin, but the exchanges that make them useable by millions.
Each step has expanded access to financial tools but it has also centralised power and enabled authorities greater say over our personal economic power.
And the echoes don’t stop there. It’s pretty striking that former US President Donald Trump is banned from Twitter but Iran’s despotic Ayatollah Khamenei and Russia’s President Vladimir Putin still broadcast with impunity.
Other sites have followed Jack Dorsey’s lead making it feel like a cartel of personal conscience for those who agree, and a cancellation conspiracy for those who don’t.
How would finance mirror this? How many exchanges would follow the example of the speech platforms that – without legal instruction – decided to allow some to use their platform while rejecting others?
Popular pressure on politicians is real – but the founders of these companies don’t have to balance the wider economy with their own ethics. Those at the top are unaccountable to the checks and balances we expect from their political equivalents, yet they continually wield more and more power over not just how we communicate but how we make transactions. This could mark a major shift in economic power.
The old boys of the City and the silent bureaucrats of the Treasury who have spent centuries considering the interests of savers and spenders, the different needs of the richest and poorest parts of the country, and followed the rules set by elected governments have lost their bowler hats and been replaced by the tech bro’s hoodie.
The question now is how these new masters of finance will see their responsibilities now that they’re the ones with the power of the platform.