The Transition Between Fiat And Bitcoin

One World, Two Systems: Why Bitcoin And Fiat Must Learn To Live Together

Two competing economic systems eye each other warily across the ideological divide. One is based on complete state control and surveillance of its citizens; the other celebrates personal and financial freedom. The world holds its breath and hopes their mutual hostility does not turn into outright conflict.

No, this isn’t the Cold War: it’s the battle for supremacy between fiat and bitcoin. And as we know from the last century, no one gains from a war between two superpowers, whether the weapons are nuclear or monetary. Instead, the two worldviews must learn to live together.

The world’s separation into two parallel, competing economic systems has already begun. So rather than “pick a winner,” we need to understand what these two ideologies want to achieve, why each will dominate its own sphere of influence, and how we can navigate this time of transition. And we must ask whether, and how, we can secure cooperation and collaboration between these two so very different worlds.

Fiat 2.0

The rise of Central Bank Digital Currencies (CBDCs) promises to be no less transformative than bitcoin, though they serve a very different ideology: state control. From a fundamental perspective, CBDCs are as poor a store of value as banknotes, and even easier to “print.” But that’s only one reason why governments see a future in digital money. These CBDCs lay the foundation for a universal financial ecosystem where every transaction is monitored and everyone’s access to the economy is controlled.

If that sounds like dystopian fiction, it’s merely the logical progression of a process that’s already been well advanced today. Just look at Facebook Marketplace: a hyper-efficient online economy that counts its customers in the billions, with incredibly powerful analytics and, crucially, complete control over its users. Break the rules, and you’re out.

It’s easy to see why Fiat 2.0 is so attractive to governments, but less obvious is why these digital currencies will succeed when bitcoin is superior in so many ways.

Superpower Tensions

To understand why CBDCs are unstoppable, remember that they are designed to work with, and support, legacy financial infrastructure. Centralized digital currencies require no revolution in the world’s financial ecosystem; they can simply piggyback on existing fiat payment rails. That’s one key reason why their success is assured, but it also sets up tensions with the parallel Bitcoin ecosystem.

When CBDCs are the de facto standard for transactions, it creates a paradigm of control. With digital fiat creeping into more areas of the economy, even without the public being fully aware of it, governments will be even less tolerant of any rival system. They will naturally seek — as many are trying now — to apply the same legacy regulation to the Bitcoin ecosystem, demanding the same types of anti-money laundering, KYC controls, and transaction monitoring.

While it’s easy to regulate what you can control, Bitcoin’s value lies in decentralisation: it cannot be censored — unless you censor internet access as a whole — and it cannot be “printed.” And while this makes it the perfect means to transfer wealth through space and time, the risk is that governments and legislators will try to strongarm consumers into adopting Fiat 2.0 by adding as much friction as possible into buying, holding and transferring bitcoin. Tensions between the two monetary superpowers are only set to grow.

Learning To Live Together

Bitcoin might be unkillable, but we can expect a rocky road to inevitable regulatory acceptance. There are two ways you can prepare: first, become an expert in Bitcoin at the technical level to understand the workarounds to any obstacles placed in the path of consumer adoption. But this requires a huge expenditure of time and effort, and even then may be beyond most people.

More realistically, people can choose services that are truly aligned with Bitcoin’s vision. Steer clear of financial services firms that claim to “do bitcoin,” yet still have a significant stake in the legacy financial ecosystem. Companies like PayPal might have a strong brand and worldwide reach, but unwary users will quickly discover that they don’t give ownership of coins to the user and require rigid requirements for withdrawing bitcoin to personal wallets.

And what of the regulators? Well, we’d like to see them play a role in bitcoin’s development – or rather, in the services built on top of it. We’ve seen how cryptocurrencies can be used as the foundation for scams and illegitimate crowd-funding endeavors. Just look at what Joseph Lubin has to say in that regard. We’d like to see regulatory frameworks that can avoid the abuse of the Bitcoin ecosystem. For this to work, regulators need to roll their sleeves up, hire experts, and create bodies and discussion panels to examine the risks and propose workable solutions, rather than just slapping layers of legacy regulation on them.

We’re seeing the emergence of two monetary standards: one for everyday financial transactions, and the other for storing and transferring wealth. Though neither can “win” over the other, the legacy financial system can make life unnecessarily difficult for bitcoin and its adherents, yet with no hope of halting the revolution. Let’s not see history repeat itself as farce, and hope the two worlds can compete but, where possible, collaborate for the greater good of humanity.

This is a guest post by Nik Oraevskiy. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.


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First look: Spike Lee’s TV ad for crypto touts it as new money for a diverse world

Spike Lee’s new ad dubbed “The Currency of Currency” launched online today, and the two-minute spot depicts crypto as new money for a diverse world.

The 64-year-old Oscar winning filmmaker directed and starred in the commercial for crypto ATM provider Coin Cloud, and in the ad, he explores themes such as racial and financial inequality, diversity, and inclusivity.

“Old money, as rich as it looks, is flat out broke,” Lee says, adding “they call it green, but it’s only white” as he cites the lack of diversity in people depicted on U.S. dollar bills and coins. While the ad spot had previously been touted as being a “Bitcoin” commercial, BTC isn’t mentioned by name at all in the ad. Instead the concept of crypto in general is referred to as “new money.”

The ad does have a loose reference to Bitcoin via a Coin Cloud ATM that contains the BTC logo, however the firm’s ATMs support more than 30 digital assets.

The commercial was created in collaboration with the Campbell Ewald marketing and advertising agency, and features appearances from actor and activist Kendrick Sampson, singer-songwriter Teyana Talyor, Ru Paul’s Drag Race contestant Shangela and Emmy-nominated Pose star MJ Rodriquez.

In the ad, Lee cites issues with fiat and traditional banks and notes there are “7 million unbanked” and “20 million underbanked Americans.”

“Old money is not going to pick us up – it pushes us down, exploits, and systematically oppresses,” he says. The filmmaker describes “new money” as “positive, inclusive, fluid” and “strong culturally rich.”

Related: Bitcoin helped the unbanked. Now, this project helps them get justice, too

Lee is known for exploring social and racial issues in his films, and the identity politics theme of the spot has drawn a mixed reaction online.

In response to ‘Documenting Bitcoin’s’ post about the ad user ‘The LogicalShaman’ stated that “making this about race at the beginning is super fucking tacky,” while Watchdog Capital’s Bruce Fenton said “Spike Lee cares more about what color skin people have than he cares about #Bitcoin.”

However “Analytics4Bitcoin” responded that they like that “more people feel included in the Bitcoin ecosystem,” and added that:

“Lots of focus on the negatives of the community but look around and what you see is a truly diverse collection of millions of people worldwide looking for better money. Pretty neat!”

Coin Cloud noted in a July 14 press release that the firm wanted to “spark important dialogue” from this ad campaign, and chose Lee specifically for his expertise in exploring social issues.

“His deep connection with communities of color, plus his track record of contextualizing issues of equality, make him an ideal partner for our goal of making digital currency accessible to all,” said Amondo Redmond, Global Chief Marketing Officer at Coin Cloud

Coin Cloud’s ad campaign will run nationally across cable TV channels such as Comedy Central and Adult Swim, and will also appear on social media platforms such as Youtube and Reddit.