July 22, 2020: Banks allowed to custody crypto
Nov 11, 2020: PayPal proceeds to do it
Jan 4th, 2021: Banks can now use crypto for payments too
This means that institutions in the USA will soon move to hold Bitcoin and other crypto assets as part of their reserves, creating institutional demand for this asset class, and most likely driving up the prices.
But it will also represent an interesting “return” to a sort of gold standard. If your pension fund is going to be buying Bitcoin, why not buy it yourself? (Kind of like buying a stock market index instead of paying a hedge fund to trade for you.) This ability to have sovereign control over a
a digital asset, storing a form of value under your mattress that can’t be diluted by anyone else, is very attractive to the Austrian Economics crowd, and people who long for the time when governments couldn’t print unlimited amounts of their own currencies. That’s why they were the second wave of adopters, after the tech geeks, and now they have made fortunes "HODL"ing these crypto assets until the institutions buy them.
In a way, by embracing Bitcoin and other cryptos, banks will mean that crypto and fiat currencies will soon coexist side by side. But the question increasingly will come up for many people, why they need the banks in the first place. With DeFi and trustless, permissionless lending on blockchains, we are seeing a gradual shift from institutions to permissionless technology that empowers individuals. Just as we saw with Email, Web 1.0 and Web 2.0 - we no longer need physical infrastructure for newspapers and magazines, radio and TV stations. Anyone can deploy code and people around the world can visit their website. Perhaps soon this will happen in the world of finance, as well.
One thing that I always question myself is How do we think the big goverments will allow crypto to get mainstream and adapted globally where we know that if that does, there might not be anymore need for banks or even governments?
Or will they have no choice?
Technology usually gives people the ability to do things that were previously done by large states or corporations.
Printing - now we have desktop printers
Mailing - now we have email
Broadcasting - now we have the Web
and so on. Consider what the Web did, for example. In the past, you had to get access to a cable channel, TV or radio station, newspaper or magazine publisher, who maintained the distribution infrastructure. Then the Internet protocols (IP, etc.) came out) and the Web (HTTP) allows anyone to deploy some code somewhere and anyone in the world can interact with it. Governments have adapted, but by and large they have accepted it.
Similarly, this new technology will allow people to have control over their own stores of value, investment, etc. and maybe interact with bots or smart contracts instead of banks. Governments will adapt, and banks will adapt. For a while banks will buy and store Bitcoin and other assets, giving you Bitcoin-backed cards and so on. But eventually all this will be automated too. Eventually technology replaces all this stuff.
That’s what I mean when I say I’m a techno-libertarian. But right now, we are still relying on WhatsApp, Telegram, Signal, etc. to connect us. That’s why people started to wake up that they might need their own community server, to own their own data and relationships, and not lose it whenever they get kicked out by Twitter / Apple / Amazon/ whatever. That doesn’t even have to do with governments, but relying on large corporations. Eventually it will all become autonomous permissionless decentralized networks.
Thank you for the explanation. That’s what I thought. If something is out of their control, and keeps becoming big and more communities will use it, I believe they have no other choice but to adapt.
Both the likely nominee for the SEC Chair (Gensler) and the top rumored nominee for CFTC (Brummer) have experience with crypto issues . . . that’s getting pretty mainstream.
That is great to hear. Thanks for sharing.