Can you imagine this: a gathering of more than 50,000 people amid the COVID-19 pandemic? This was the case at Bitcoin 2021, a conference that ended in Miami on June 5. Leaders from around the world should pay close attention to the development of cryptocurrency to avert a new class conflict.
Digital currencies can be roughly divided into three categories: cryptocurrency, stablecoin and central bank digital currency. Among them, the most discussed and eye-catching is bitcoin, a type of cryptocurrency.
In a speech in 2014, I talked about a Jan. 15, 2012, episode of the television series The Good Wife, called “Bitcoin for Dummies,” in which a group of lawyers discuss the legal nature of bitcoin, concluding that it is similar to a commodity. I said then that bitcoin is not a currency, let alone fiat money; it is at best a kind of investment tool. The enthusiasm for it can be maintained if buyers remain confident, but the craze could disappear like mist once that confidence collapses.
The price of bitcoin has fluctuated greatly in the 12 years since its inception. It is not a unit of account or a store of value, but its market capitalization is about US$2 trillion, gradually entering the stage of maturation. When I talk with young people or those in the cryptocurrency community, I wonder how an asset without intrinsic value could be so popular.
Younger people think they have no role in the financial game of the older generation; the distribution of wealth is uneven and the gap between rich and poor has widened. They yearn for a chance to lead the financial system and improve their lives. The digital divide provides this opportunity. Through this divide, they can eliminate the predecessors of the “Stone Age” and create a new paradise. It feels that a new form of class struggle, or the mentality of it, is taking shape.
In 1848, Karl Marx and Friedrich Engels wrote in The Communist Manifesto that “the history of all hitherto existing society is the history of class struggles.” An article in the May 29 edition of The Economist said: “The crypto kids believe that blockchain-based finance is the future and a haven from the inevitable degradation of fiat money.”
Coincidentally in the past year, domestic financial reporters have interviewed members of the cryptocurrency community, and they shared exactly the same views, and all looked forward to a future financial system they could master. Witnessing endless quantitative easing around the world, while a little worrisome, might be expected for a decentralized system.
However, the traditional financial sector has no confidence in investment tools that lack intrinsic value. Bank of International Settlements general manager Agustin Carstens once condemned bitcoin as “a combination of a bubble, a Ponzi scheme and an environmental disaster.” In addition, no central bank holds an optimistic view of bitcoin’s future. Even before Bitcoin 2021, Bank of England Governor Andrew Bailey said: “I’m skeptical about cryptoassets, frankly, because they’re dangerous.”
All of this sounds correct, but one day a younger generation will take over, and if bitcoin or tools like it are still the rage, it is hard to imagine how we would reposition fiat money and cryptocurrency.
There is an illustration alongside The Economist article of two dinosaurs, with their long necks shaped like dollar signs. Above them, a meteorite is falling from the sky with the logo of bitcoin. Financiers of the Stone Age who shout “Welcome to Jurassic Park” should think about the development of the “Digital Age” and stay out of issues that might lead to class conflict.
Sean Chen was premier from 2012 to 2013 and is chairman of the Appacus Foundation.
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