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Cryptocurrency might revive the gold standard system

Author : Pascal de Lima

11:40, 29 November 2017
Cryptocurrency might revive the gold standard system

Author : Pascal de Lima

Economist Pascal de Lima states that cryptocurrency provides necessary guarantees of security and flexibility in terms of the main currency

11:40, 29 November 2017

Read the original text at Le Monde.

Open source

Financial technologies, robots and artificial intelligence in general, as well as the crypto currency are eliciting unprecedented interest in the world. It makes us think about the basics of its success.

Just as it was in the 1960s, at the time of the birth of the great era of computer science, the crypto currency is based on the principle of justice and progress. The fact is that the 1960s were the prelude to a magnificent history, the history of technophiles. People thought that technology would solve problems in all areas, from economics to medicine. The symbol of progress was the Bay of San Francisco, the center of creation. The culture of entrepreneurship and the first technological start-ups were formed these.

Related: Bitcoin’s price crashes by 30 percent over week

Hippies were technophiles and dreamed of progress through technology, about countering excessive consumerism and growing inequality. Everyone believed in the power of man over the machine in order to achieve social goals and to counter the central authority, which was considered bureaucratic and unfair.

After a long period of progress in the "Glorious Thirty," computer science has become an "exclusive" technology since the 1980s (and the development of expert systems, as well as artificial intelligence), which has been given some responsibility for the growing inequality at that time.

It is in that spirit that one should think about the motivations for the emergence of a crypto currency, a currency-standard that suggests the currency like a gold standard of the 1960s (with the exception that it is electronic).

Related: Ukraine plans to implement bitcoin use under the oversight of National Bank

Let us think about bitcoin, the well-known crypto currency. Bitcoin appeared in what Americans call "cash ghetto": on the one hand, the poor use cash, on the other hand, upper classes prefer transfers and bank-controlled secure payments. The bitcoin originated in an effort to give everyone a safe method of payment.

In addition, bitcoin is a consequence of the economic and financial isolation of some population groups. Many developing countries witness a strong rejection of central monetary authorities, for example, the CFA franc in West Africa. All this is superimposed on the so-called "invisible tax", the inflationary monetary policy, which is aimed at reducing the cost of money to finance government spending, which undermines the purchasing power of a large part of the population.

This is why a number of countries like Venezuela and Zimbabwe are considering the legalization of bitcoin, following in the footsteps of Canada and the US. As for Europe, the queues in banks during the Greek crisis and the taxation of deposits during the Cyprus crisis would not happen if there were a "bitcoin-standard" in the Eurozone (e-currency policy).

The plan "B" of the Minister of Economy of Greece, Janis Varufakis, during the Greek crisis just meant replacing the euro with electronic crypto currency. Today, the cost of the bitcoin market is estimated at 162 billion dollars.

Related: Alternative Money: Why more and more countries recognize cryptocurrency?

Thanks to its pillar in the face of a secure crypto currency, built on the algorithms of the blockade, it allows, for example, to control inflation in real time. Thus, it can bring a revolution in the monetary policy of central banks.

Nevertheless, some will say that the crypto currencies are the result of some anarchic thought, and that they are connected with the shadow zones. Nevertheless, before forming your own opinion, you should consider both sides of the coin. Financial authorities consider the main risk of crypto-currency fraud. Further, they note the hacking and illegal nature of some operations.

We should remember about the strong instability of currencies such as bitcoin: a collapse can be really dizzying. The use of crypto currency requires a guarantee that the contributions and regulatory actions of the currency authorities would be made. If these conditions are met, it can become a real revolution in monetary policy.

Related: Economic forecast for Ukraine: Hryvnia weakening, high inflation and tarrifs

Whatever it was, the regulation of financial activity in real time in the Internet age should be primarily focused on combating money laundering, as indicated by the American financial regulator. This should be the focus of the fourth European directive on combating money laundering.

In any case, adoption of a crypto currency does not mean rejection of the central currency. It could create conditions for the revival of the gold standard system, while security of the block and the power of electronic computing would, in cooperation with the central authorities, allow the deficiencies of this system to be eliminated, which Richard Nixon denounced in 1971 . The end of the gold standard was associated with colossally high requirements in terms of dollar circulation due to the uncertainty around the American real economy and its inflation rate.

Related: Economic revolution is inevitable in Ukraine

Provided that the authorities form a rigid legal framework and the consent of banks, the crypto currency can become a modern instrument in the service of monetary policy, which will revive the principle of the gold standard for currency stability and greater justice on a global scale.

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