To ask whether the government can create a cryptocurrency is to misunderstand what cryptocurrency is.
You see, most of the governments throughout the world force us to use their currency to do stuff. All countries have taxes and in order to pay taxes we must pay them in the currency that our government tells us to use. We don't pay our taxes in gold or oil. We use dollars in the US and euros throughout most of Europe.
The 1st world is relatively free market in many aspects of life except for one: money.
We are free to create products and services that compete against each other when it comes to mobile devices, computers, medicine, education, entertainment and so on. But when it comes to money itself we're not free to compete against the government. At the end of the day when it comes to taxes they must be paid and denominated in the currency that our government tells us.
So because of this we don't have a free market in money. We are forced to use the money that our government tells us to use. This is called fiat money. The technical term is legal tender. Our money is money by government decree, not by any other reason.
If we really had a free market in a country then we would have a free market in money. But the government knows it can't do that because it would throw off the tax system. But even more important, if we had a free market in money then the government couldn't control the money supply and inflate or deflate at their whim.
If we had a free market in money the government couldn't raise revenue simply by printing more money.
All governments know this. And all the people behind crypto know this as well. And in this sense the two parties are at odds. Crypto advocates want a free market in money and want competition. Crypto advocates want to see innovation and utility in money. They want to see the best currency win and they want to have a currency without manipulation and control.
Governments see this the exact opposite way. They want control over the currency and they want to be able to manipulate markets with the currency. One of the most important systems of control that any government has is their currency.
So knowing this we have to revisit the question: Can The Government Create Their Own Cryptocurrency? Yes, of course they can. Anybody can create a cryptocurrency. The better question is what makes people use cryptocurrency?
Why do people use Bitcoin instead of dollars? The answer is obvious.
People use Bitcoin because it is a vote against the dollar.
The people behind crypto understand economics and the turmoil created and sustained through a government monopoly on money. Crypto people understand the ramifications of central banking institutions like the Federal Reserve and prefer to stay away from them as far as possible. Crypto people understand what $20+ trillion in national debt means and the ramifications of this. So by using crypto you are voting against this. By using crypto you are voting for a free market in the most essential part to any free market: money.
So you have to ask yourself: why would anybody use a government cryptocurrency? If the government cryptocurrency is centrally controlled by the government nobody is going to want to use it. People don't use cryptocurrency for the technology -- they use it because it's an alternative to fiat money. People use crypto, for the most part, because it is decentralized. A government is not going to create a decentralized cryptocurrency. This is against the nature of government. The government doesn't immediately benefit if they create a decentralized, open source cryptocurrency. They're too naive to even think this way. It's never going to happen.
And because of this the government will never be able to compete against the free market cryptocurrencies.
Free market cryptos like Bitcoin and Ethereum will outcompete government cryptos every time because they are open and voluntary.
When you take these components away you take away crypto itself.
Cryptocurrency isn't about blockchain. Blockchain is just a crappy database. We already have databases way better than blockchain. Cryptocurrency is about decentralized trust. And the government isn't in the business of decentralizing trust. They're in the exact opposite business.
So it doesn't even matter if the government creates a crypto. Nobody is going to use it. People who use crypto aren't stupid. And the general public, absent government intervention, will slowly shift towards the better solution like they have with every other innovation throughout history. We're already seeing the market cap of cryptocurrency rise immensely because the general public is starting to figure it out.
People are starting to realize that holding your money and wealth outside of the government fiat system just might be a good idea. And the more this good idea gets out the harder it's going to be for the government to bring people over to their cryptocurrency that has not the necessary components of a successful crypto: voluntary and decentralized.
If the government creates a crypto they will only win by force. They will only win if they force people to use it. And quite frankly, that is going to be an increasingly difficult dish to serve.
Filed under:Politics / Government, Bitcoin, Cryptocurrency