National governments are now looking into the possibility of launching their own national cryptocurrencies, and not without a hefty amount of controversy. Crypto purists argue that national cryptocurrencies defeat the purpose of having a decentralized currency in the first place, while pragmatists say any large-scale adoption is a step in the right direction.
The major players
Quite a few nations have expressed interest in getting into the cryptocurrency game:
- Venezuela is considering adoption of the El Petro to deal with US economic sanctions and government purchases in the real estate and hydrocarbon fields.
- Sweden’s e-krona counters low cash turnover rates.
- United Kingdom is looking into ways to create a crypto alternative to British Pound that will allow citizens to keep their funds in a digital form and make transactions in no time.
- Estonia, Latvia, and Lithuania are all looking for ways to blend cryptocurrency use into day-to-day life – primarily to tax it – and several Caribbean nations are experimenting with similar projects.
- Then there’s Russia’s CryptoRuble and an equivalent project on an equivalent scale in China.
So, it’s clear that countries around the world, and in vastly different economic circumstances, are taking a hard look at introducing their own sovereign cryptocurrencies. The whys differ wildly, but they all have one central thing in common: control.
Put aside the myriad reasons an individual country might want to offer a cryptocurrency. After all, they’re likely to be as diverse as the reasons individual investors hold various cryptocurrencies. It might be a currency fix, as is the case in Sweden, or an opportunity for taxation, as is the case in the Baltic states. But why, specifically, a cryptocurrency? What advantage does a country that can already print its own currency gain by stepping into the notoriously anti-government crypto sphere? After all, wasn’t one of the stated original use cases for Bitcoin a peer-to-peer currency mechanism independent of third parties, like national governments or banks?
Therein lies the main advantage for a national cryptocurrency, argue crypto purists. By endorsing a relatively safe cryptocurrency with government-level development that features high centralized control, a government can effectively displace “wild” cryptocurrencies. It’s a version of the fiat market, simply ported over to a digital platform, these folks argue. A national cryptocurrency is only a cryptocurrency in name and general function; it does not really enjoy freedom from a third party, as a national governing body can adjust its supply. This makes it safer than some of the cryptocurrencies currently circulating, but it also takes away much of the freedom of movement that generally defines cryptocurrencies. On the other hand, adoption would be almost instantly guaranteed due to government backing, and pricing could stay relatively stable.
While crypto purists decry the use of national cryptocurrencies on both practical and ethical grounds, at least one splinter group of the cause views them as a deliberate attack on internet freedom. Championed most publicly by the so-called Cypherpunk movement, which David Chaum began in 1985, this group views national cryptocurrencies as an attempt to pervert the otherwise anonymous – and nation-less – state of the internet. In a very real sense, this group argues, the internet is a state above and beyond extant national governments, and cryptocurrencies are its native currency. As such, Cypherpunks argue, national governments have no business trying to distort the meaning of cryptocurrency by introducing a digital fiat version. Such a move to national cryptocurrencies may delegitimize existing cryptocurrencies and erode the freedoms of true peer-to-peer sharing platforms.