Many critics are failing to grasp that the rise of cryptocurrencies has a deeper meaning in the context of a digital world.
Today’s list of cryptocurrency sceptics reads like an all-star line-up of the global financial and economic elite: US Treasury Secretary Janet Yellen, Nobel prize-winning economist Nouriel Roubini and Bank of Canada’s deputy governor Tim Lane are among their number. Many of the points they raise are valid: cryptocurrencies are highly volatile and concerns over their use in money-laundering schemes only seem to be growing. As a basic means of exchange, they are also difficult, expensive and time-consuming to use. And even though thousands of cryptocurrencies populate the wider marketplace, only a tiny fraction of them are likely to boast any longevity. Some critics even suggest that central bank digital currencies will kill them off.
[Cryptocurrencies] most basic premise, individual sovereignty, both aligns with and reinforces the trends that are shaping humanity’s outlook over the next century
These arguments — and others — are compelling. But they fail to detect something broader, or more meaningful, about the rise of cryptocurrencies. Human societies are stepping into a state of hyper-digitalisation; friendship, love, art, recreation and, most importantly, identity creation are to greater or lesser extents ‘scaling up’ in the digital realm. Today, for example, blockchain-based virtual worlds, like Decentraland, are a go-to destination for crypto investors looking to expand their digital real estate portfolios or to buy, sell and create art in a constantly evolving reality. Elsewhere online, people are breeding, racing and trading digital horses by staking their ownership through non-fungible tokens.
These cases may seem extreme, but they are growing in popularity. They also, in some sense, piggyback off existing trends fomented by social media: individuals curating online identities and “existing” in digital communities that generate and consume information (mostly in an echo chamber). Over time, this digitisation of life will not sit easily with Westphalian state structures and national identities, nor will it lend itself to existing economic frameworks.
The rise of cryptocurrencies should be seen through this lens. Their most basic premise, individual sovereignty, both aligns with and reinforces the trends that are shaping humanity’s outlook over the next century. In a future where groups and communities can create their own currencies, and where individuals will be living ever more digital lives, cryptocurrencies will flourish. The sceptics are failing to grasp the bigger picture.
