The rise and rise of crypto

I voted for Eric Adams, the new mayor of New York, because I thought he was the best person to tackle the growing crime problem of the city, about which I wrote here in an earlier note:

I never thought he was a crypto supporter. Last week, the mayor made his promise to accept his first salary check in cryptocurrency by using Coinbase (an online trading platform) to be paid in Bitcoin and Ethereum.

impressive. Just wow. There are many things to consider here. Firstly, this is New York, and if we shift to a world of digital currency (what we could be, considering that dozens of central banks in the world, including the Fed, are now experimenting with it), then it is understandable that this is the case that the city wants the city.

He is not the only one. Suddenly every collection of individuals can create their own digital creation coin, supported by public and private institutions. El Salvadors Bitcoin City, Miamis Miamicoin and Nyccoin are all versions of this beautiful new world in which public institutions encourage investors to invest money in work projects supported by digital technologies. The mayors of Miami, Francis Suarez and Eric Adams, rely on "city coins" to lure money into the burgeoning crypto industry to finance things the city needs. At the end of 2021, Los Angeles Crypto.com, a trading platform for digital currencies, allowed $ 700 million for the name rights at the Los Angeles Lakers stadium. Wyoming's law on decentralized autonomous organizations (DAO) will enable new types of companies to found completely digitally, in the hope of making the region a center for web3.

Much of it is very likely to be about getting in the late-stage hype of the latest tech bubble. We won't really know until the bubble bursts. But part of it concerns the way cities, countries and regions strive to control their own financial fate. Like my colleague from Financial Times, Brendan Greeley, noted: "There is a long history of city -states that produce their own money." In medieval Europe, financial skills became a tradable asset, and the places that most of them had - such as Venice and Florence - flourished. "If you believe that crypto is the future of financial system, you should definitely invite Fibonaccis and Paciolis to your city." So Miami tries to attract fintech startups and pay salaries into the city Coin to heat the boom. In a way, these combined public-private efforts together with the purely commercial bet are that money in a post-global, post-bretton-woods world no longer falls within the area of ​​responsibility of states.

Personally, I play it quite carefully with everything that is not supported by a legitimate central bank, at least at the moment. But assuming that we switch to digital currencies, the entire financial system will change. Course banks themselves, which are traditionally the way in which money is distributed by the government to individual consumers and companies, would no longer be necessary. Governments could simply give consumers digitized tokens that are entered in the computer books of the central banks themselves.

As Jens Weidmann, former head of the Deutsche Bundesbank, said in 2021, the process will very likely shake the income from the commercial banks and create a much more decentralized and localized financial system - governments and consumers would interact with each other completely new kind of banking system. While the legal framework as well as logistical and technological questions still have to be drawn up, it is significant that JPMorgan Chase CEO Jamie Dimon's JPMorgan CEO from 2021 addressed this opportunity, as well as international banking agencies such as the bank for international payment compensation and the IMF.

In a way, all of this is a bit back into the future. If the British economist had prevailed in Bretton Woods, we would use a "Bancor" or an international currency that would essentially be a basket of several currencies from different countries, and not a dollar. This was really about preventing the type of commercial and investment corporation weights that we have today. If a single country has both the privilege and the burden of being the international reserve currency, as the United States has done since the Bretton Woods era, a lot can be done to contain economic imbalances. The dollar not only allows the Americans, but forces them to become debtors in a sense, since investments from all over the world flow naturally into the dollar, drive its value up and promote financialization and speculation.

But all of this could change soon. Decentralized technology has made it possible to remember as a new type of Bretton-Woods change-away from the dollar as the only global reserve and towards a new system in which countries, cities and municipalities of all kinds can benefit more control over their financial systems, in good and evil. As I have argued in previous columns, I think that the currency flows will gradually reflect the trust that people have in different institutions, be they public or private.

My question for you, Ed, is: If you received your salary check in something else as a dollar, what would that be? Gold? Georgetown coin? Digital RMB? Pelosium? Or….?

Literature recommendations

• Speaking of money, some time ago I enjoyed Peter Coy's great contribution to the INST on the paradigm shift that are currently taking place in the currency. The fact that the Nyt has hired it from Bloomberg also makes me believe that they deal more seriously with comprehensive economic reporting.

• As always, Ross Dothat has clever and unexpected things to say this time about the US health system. Conclusion: America cuts off best on the extremes - in advanced research, but also on the edges of holistic medicine - but not so well in the middle.

• And as a child of immigrants I loved these New York satire about "like immigrant parents that I love you". " Note on Papa - the point about cutting fruit that I have not asked for, and to be careful to make sure that I eat it - that's for you.

Edward Luce answers

rana, I would be very tried to follow Brendan's example and ask the FT to pay myself with real estate. In contrast to Bitcoin (or Ripple or Dogecoin, etc.), I would have a certificate of ownership and a regulatory authority to enforce my property rights. If I lose the house key, I could have a new one made. My problems with the cryptocurrency are not only very ignorant, but sometimes rational and sometimes instinctively. The rational part is that Krypto still operates in the Wild West. Many of these cryptoplate forms are located in places where they can escape regulation. Or you just live in the cloud. You hear stories of people who lose their money and find anyone who takes responsibility. Even if you find a person, you react more like technology freaks than bankers - it is not your job to guarantee your money. What makes crypto more of a speculative vehicle than a place where you can keep your money. I know that many people have made a lot of money with these instruments. The price for Bitcoin rose from around $ 3,800 in early 2019 to $ 65,000 in late 2021. Even Tesla was put in the shade. Since then, however, she has halved. I would be excited to see whether Eric Adams would still like to be paid in Bitcoin if it goes down further.

I also have viscerals. I lose passwords all the time. But my bank/streaming video provider/school of my daughter/Whoever it is is always so friendly to send me a link to reset it. What if I have lost the password for my digital wallet? Then I'm on my ass. I'm just as much as the cryptosystem. My suspicion is also awakened by the kind of people who stand up for crypto, including great tech-libertarians such as Elon Musk and Jack Dorsey (Strike), bad celebrities like Kim Kardashian and Matt Damon, who promote the campaign in crypto action in crypto. who believe that the world is ruled by secret cabal (attack three). This tweet of Josh Mandel, the right-wing extremist Republican Senate candidate for Ohio, summarizes the latter: "States that submit to the authority of the almighty God // States that are not. States that are family-friendly // states that are not. States that invest in the #bitcoin infrastructure // Pro god, pro family, pro-bitcoin state. " It is difficult to find a better summary of nativistic politics. Towy white workers with cultural wars and then make them put their money into a pyramid system.