Last year, in a letter to investors, Dan Morehead, the chief executive of Pantera Capital, wrote: "The United States printed more money in June than in the first two centuries after its founding."
The US budget deficit for the month of June, he warned, was larger than the total debt incurred from 1776 through the end of 1979. Meanwhile, in Europe, the European Central Bank (ECB) continues to print money at breakneck speeds.
With the rapid debasement of fiat currencies, making the move to a decentralised digital currency built on the principle of a finite supply seems logical. Something like bitcoin, for example, appears to be a reasonable proposition.
However, when Richard Nixon did away with the gold standard 50 years ago, monetary reason was largely abandoned.
No, the next step in our monetary evolution involves CDBCs, or central bank digital currencies.
Essentially, CBDCs are a technological upgrade on physical cash. Not very sexy, not particularly innovative - but highly efficient. Unlike bitcoin, CBDCs are centralised in nature, which means they are issued and regulated by a singular entity, in this case a country's monetary authority. CBDCs operate on a principle of practicality, unlike bitcoin.
Have you tried to make a purchase with bitcoin? Of course not. For a currency to flourish, practicality is a key ingredient.
With China, the US, and the EU all likely to roll out digital currencies in the very near future, bitcoin's future looks perilous. After all, the idea of bitcoin and CBDCs coexisting in harmony is ludicrous. The former is built on the idea of removing central banks from the economic equation. CBDCs, on the other hand, are built around the authority of central banks. The house always wins.
Speaking of winning, China, the fastest-growing economy in the world, is busy developing its own CBDC. The Digital Currency Electronic Payment, a digital version of the yuan, the country's legal tender, has already been piloted in a few different Chinese cities. As China grows in economic significance, its domestic efforts will have ripple effects around the world. This is evident in Africa, the fastest-growing continent in the world. Today, through the Belt and Road Initiative (BRI), Beijing essentially controls Africa.
When it comes to digital currency dominance, China also appears to be winning the race. Last month, journalist Amar Diwakar wrote: "China's Belt and Road initiative is a ripe entry point for the digital yuan's internationalisation. It could ask BRI-participating countries to start accepting the digital yuan, make loan payments and pay to install infrastructures such as point-of-sale terminals and lower transaction fees."
Today, according to the Bank for International Settlements, roughly 80 per cent of central banks around the world are engaged in CBDC research. Countries like Sweden, with its e-krona, and the Bahamas, with its Sand Dollar, have already tested the digital waters.
Once rolled out, CBDCs will be interoperable, meaning people will be able to transfer and convert currencies accurately, effectively, and consistently.
CBDCs will allow central banks to monitor every single transaction made. This, in turn, allows governments to more closely monitor their citizens.
Even if governments weren't actively working on ways to undermine bitcoin's ascendancy, bitcoiners are notorious HODLers. A HODLer, for the uninitiated, is someone who holds their bitcoin, refusing to sell at any cost. In 2010, a man from Florida paid 10,000 bitcoins for two pizzas. As of yesterday, those bitcoins would be worth more than $AU700 million. This was a teachable moment, and a painful one for the Floridian.
For well over a decade, bitcoiners have been warned to HODL, HODL, HODL at all costs. In other words, do not, under any circumstance, use your bitcoin to purchase products. Bitcoin may very well be a store of value, but it's certainly not a currency. Again, it lacks any sort of practicality.
CBDCs, on the other hand, once fully implemented, will allow everyday citizens to purchase the essentials - like bread, milk and pizza (without soul-destroying shame).
- John Mac Ghlionn is a researcher and essayist based in east Asia. His writing has been published by the likes of The Sydney Morning Herald, The South China Morning Post, and Bitcoin Magazine. Twitter: @ghlionn