The direction digital currencies are headed in is real bad.
The head of a startup, Adam Ludwin CEO of San Francisco-based Chain, was recently in Washington D.C to introduce the digital blockchain to central bankers.
He met with central bankers from 90 countries including Federal Reserve Chair Yellen, as well as officials from the International Monetary Fund, World Bank and Bank for International Settlements.
And get this, the meeting was held at the Washington D.C. headquarters of the Federal Reserve, the notorious Eccles Building where monetary policy meetings are held.
Luwin's pitch to the central bankers was about pure control, that is, the central bankers can get even more control over their monetary systems and a countries economy by going digital.
“We’re surrounded by these bearer instruments that have become art,” he said. So, naturally, he decided to show them the power of digital. As he spoke, he pulled out his phone and sent a bitcoin donation to Wikipedia.
“That was probably the first time bitcoin was used from the Federal Reserve,” he said. How much did he send? “A Hamilton,” he said, referring to the $10 bill. “It was intentional.” Treasury Secretary Alexander Hamilton persuaded Congress to create the First Bank of the United States in 1791.
On a more serious note, Ludwin told bankers that the question they face is not how digital currencies can help the current financial system, it’s what role central banks decide to play. They can operate the digital networks themselves, issue digital assets, hold those assets, create products and services to run on those networks or just observe them, he said.
In a specific example, he said the growth in leveraged credit products like repurchase agreements, commercial paper and money market funds are a natural fit to be transitioned onto a blockchain.
“That’s where central banks have the least ability to direct the economy,” he said, referring to those markets as “shadow banking.” If banks and their customers conducted those transactions on a blockchain, it would give central bankers new insight and transparency. That’s because all transactions on a blockchain are recorded, can’t be changed and can be viewed by anyone on the network at any time, including regulators.
And Yellen? How did she appear to take it all in? “She got it,” Ludwin said.Digital currencies are anti-freedom, anti-libertarian. They are about tracking and manipulation.