Over the past week there has been a great deal of discussion in the alternative financial media about China's ACChain digital platform and the coming creation of an eSDR cryptocurrency to replace sovereign fiat as the next global reserve. So with this revelation coming to the fore, perhaps one question needs to be asked regarding cryptos such as Bitcoin and the nearly 1000 other private ones.
Were they simply an experiment to get people desensitized to a coming all digital monetary system?
For Bitcoin evangelists, this question of course would be seen as heresy, as they quickly point to the fact that some anonymous guru by the pseudonym of Satoshi Nakamoto provided the blueprint for the masses to have their own decentralized money outside the bounds of government control. Yet on the other hand, many of them who have no real knowledge beyond the fact that they are speculators in the asset will tell you how much Bitcoin, Ethereum, and other cryptos have gained in value in relation to other currencies and that you can become Rich! Rich! Rich! by buying into them.
And for the most part if you can survive the volatility swings, that second assessment has proven itself correct.
But what if the unknown (and still unknown) entity who calls himself/herself Satoshi Nakamoto was not the first to publish a white paper on cryptocurrencies, and in fact one was published with nearly the same ideas and concepts 12 years before by none other than...
In fairness, finding a White Paper hidden deep within the electronic library of MIT is not enough to make the argument that all cryptocurrencies are the invention of, and an experiment for The Powers That Be. No, we must have more facts that can be put together to determine the legitimacy of this position.
In October of 2008, the global banking and financial system experienced a crisis that many would say was large enough to collapse the entire global economy. So is it odd or just a coincidence that in that very same month an anonymous individual by the pseudonym of Satoshi Nakamoto would publish his/her White Paper that could and perhaps will change the way individuals, businesses, and governments deal with money?
Yet even beyond this coincidence, there are more potential 'coincidences' to look at here. Bitcoin has been around as a viable cryptocurrency since its creation in 2009. However outside of the Mt. Gox fraud and bankruptcy in 2014, and the arrest and conviction of the owner of the digital Silk Road site, very few individuals had even heard about, or knew of Bitcoin.
Yet why all of a sudden did the price begin to spike around July of 2016, and continue upward in nearly exponential fashion over the past 13 months.
Did something occur in July of last year to coincide with the sudden spike in price that has now seen the cryptocurrency move virtually parabolic and exponential?
In late April of 2016, Time Magazine picked up on a White Paper published in 2014 by Harvard Economist Ken Rogoff which called for the banning and elimination of physical cash. A few months later, former Assistant Treasury Secretary Larry Summers and many other high level economists began calling for the elimination of cash, and the introduction of a completely digital money system.
This clarion call to ban cash seems very much to coincide with Bitcoin's sudden rebirth after a couple of years of stagnation following the Mt. Gox debacle.
Lastly, we need to take a look at something that has been a profound truth ever since governments began controlling the printing and issuance of money and currency. In nearly every instance, if a private form of money was created by an authority that was not tied to the sovereign government, that government would quickly and ruthlessly prosecute the offenders and destroy that currency in short order.
To date, no government has outright banned Bitcoin and other cryptocurrencies, and some have even integrated them into their own economies. But as of yet, the $100 billion market cap of all cryptocurrencies has barely touched the FX market which does an average of $5-7 trillion in transactions per day.
Returning to the eSDR...
With Fintech and the blockchain accelerating in scope at incredible rates, it is almost to the point where the digital platform to replace banking and settlement as we know it is now here. And because sovereign countries have destroyed their own currencies, especially in the actions taken by central banks following the 2008 crisis, it would not be very feasible to simply transpose depreciated currencies into digital form when it would be much better to start from scratch and remake the financial system with a clean slate. Thus the Chinese are looking into this by offering up the digital version of the SDR.
While speculators of Bitcoin and other cryptocurrencies have driven up the price to where it no longer has any relation to the sovereign currencies they may be valued or transacted in, realize that at any time one or more governments could crush them with the stroke of a pen by outlawing or criminalizing them as a counterfeit currency within their domestic borders. But for now these cryptocurrencies have provided a wonderful petri dish of analysis for governments and central banks to observe, and for investors a fantastic opportunity in the short term at least to get rich on the technology that will one day replace physical currency.