Right now there are not many places that accept Bitcoin directly as a payment and even fewer that accept other currencies. Part of the reason for this is the absence of infrastructure to make goods and services exchange possible. Where is my Bitcoin debit card? Yes I know, it's right here, but these tools are pretty limited compared to those available for fiat currencies. That will probably change. I have no doubt. Expansion of daily exchange mechanisms will probably explode after there is sufficient market consolidation to sort out the wheat from the chaff among the crypto contenders. Are we calling that crypto-currency 2.0 yet? I'm having dreams of the 90's (and not of the Portlandia kind). I was sad to see you go, Pets.com.
Let's just suppose that debit and credit cards linked to ethereal wallets become common place. So what? What guarantee do we have that people will take them? Listen, the backing of fiat currencies by the power of the state is good, bad, and ugly. We have a dream of liberating monetary policy from politics. I get it. Maybe someday the federal reserve chairman will be a rational artificial intelligence, and I'll bet anything that Skynet comes to finance long before it comes to the military anyway. It's more likely to happen in Singapore than the United States, but whatevs. The point I'm trying to make here is that US specie and notes are legal tender for all debts and taxes, etc (Coinage Act of 1965). Contrary to popular belief, this does not mean that private businesses within the US are compelled by law to accept US dollars. However, they are compelled to pay their taxes and water bills in US dollars, meaning that they must at some point acquire US dollars and are indirectly compelled to accept this currency to ensure continued existence within the US. Other countries have similar provisions, but as a US citizen I am mostly familiar with the what I live with day to day, natch.
Great. So why the hell am I saying all this? I guess my point is that part of the value of fiat currency stems from the compulsion of central banks on their jurisdiction to use it. I know. DUH. But think about it. We focus a lot on the the control of M1 and M2 supply and flow, a lot on treasury interest rates, a lot on Breton Woods and the oil trade - but not so much on the simple fact that, through one means or another , central governments turn people and institutions within their influence and say, quite simply:
You guys have got to use this currency. Because I said so.
Is this an example of power than can corrupt. Most probably yeah, you betcha. However, it also protects those who are most vulnerable. In their libertarian race to throw all the bums out, many revolutionaries forget that they may be taking their privilege for granted. They have computers and broadband and Bittrex accounts and the education and spare time to figure out how to manage their cryptocoins. Not everyone has that advantage. Some people depend upon some kind of authority guaranteeing a certain minimum level of utility for the 20 dollars in their pockets.
The thing about markets is that they are in fact capricious. Yes, they are. Even when they are efficient, market forces can change based on a dozen fragile metrics. One traditional role of government has been to protect those who are vulnerable to these forces. It doesn't always to it well and sometimes it fails to come to the show altogether, but there isn't another entity that can do it. Market forces will not come to the aid of Joe Mechanic when he needs it most. By nature, governments and central banks work against market forces. Some people, particularly those firmly in the crypto camp, see this as unmitigated corruption - by definition. I call horseshit. Let's not be blinded by the evils of evil men to the possibilities of true collaboration. Blame Star Trek for making me believe such comraderie is possible in large doses, but maybe just maybe there is a role for a Leviathan after all, to compel financial exchanges to accept the little guy into the fold when no one else will.
