It is almost hilarious that the U.K. is thinking about a digital currency that its chancellor is calling britcoin.
The most hilarious part of this, at least to me, is that the U.K. pound is exactly a digital currency already.
The U.S. dollar is a digital currency, the yuan is a digital currency, the euro is a digital currency.
It’s hard to imagine there is a modern currency that isn’t almost entirely digital.
Almost all our money is digital.
Only small amounts of the money in circulation is in any way not digital. Non-digital money like, for example, physical cash is only a tangible tip of a vast iceberg of money, all of which is digital.
Money as we are used to it, the non-crypto kind, is just recorded on a computer ledger, but unlike a bitcoin the ledger is centralized and the rules of the money’s issuance and handling are centrally controlled, directed, and regulated.
The difference between a “britcoin” and a “bitcoin” is the difference between a British pound today in your pocket and a sprinkling of satoshis somewhere in the crypto-ether.
Their digitality is the least relevant of their differences.
Decentralized money is utterly different from centralized money.
The centralized government will never issue decentralized money.
It would not even be a good thing.
The government will never — can never — give up its control of currency.
It is their currency, in the other sense of the word: their money defining who and what they stand for.
They will and cannot decentralize. Power, money, and centralization are the core of politics.
Who would even want their elected governments to give up that dynamic?
Crypto is not a replacement technology for money, it is a new asset type.
It is a fabulous new source of wealth made possible by the enabling technology of computing. A bitcoin can not replace a U.K. pound and a britcoin cannot replace a bitcoin.
There is a pretty concrete reason why crypto is not the way ahead for everyday money and that is it by its very nature is not part of the banking system.
It doesn’t replace the banking system and it barely intersects with the juggernaut of modern finance that makes the world spin.
If a country came up with a currency that didn’t need to be banked then the current system of fractional banking would simply cease to exist because there would be no deposits.
Without deposits, without banks, our modern economic system simply doesn’t exist.
No government is going to turn its currency into an instrument that can simply disappear like the buried gold of ancient times and it was amusing to hear that U.K. legislators were recently in a panic about how much cash was apparently missing and by implication in the hands of bad actors stashing fortunes away from the authoritarians for all kinds of nefarious reasons.
Governments need and want to know where the money is, need to control it, debase it, confiscate it, know how much is in play.
Government currency will always be centralized and the core power of crypto is that it is the very opposite.
Cryptocurrency is decentralized or it is just a voucher-like a food stamp or Amex traveler’s check.
A government centralized digital currency is nothing more than what we already have.
As such, the paths of crypto and digital currencies have already diverged and they are unlikely to ever come together in the future.
However, it is clear that the politicians and the central banks are waking up to the fact that with crypto a financial behemoth has awoken and that they must rush in.
The potential is trillions more and many countries will simply not capture any of those gains.
Whether fear of missing out (FOMO) will be enough for countries to grasp the opportunities remains to be seen but it is dawning on countries like the U.K. that crypto will turn backwaters into the muscular economies of the future and that it will also turn economies that do not embrace this revolution into backwaters.
If they do let this economic revolution pass them by as so many European countries let the industrial revolution get well underway before they were prepared to jump into that new world.
The U.K. is not going to kill its banking system by creating a currency where the cash can melt away into digital wallets outside of the banking system.
No country will.
Perhaps in the next 20 years, there will be some kind of centralized money with a gimmick or two.
Meanwhile crypto will have already turned the whole world upside down.
It seems that government simply cannot keep up and that’s probably a good thing.