As one of the first countries to industrialize in the 1760s, the British Manufacturing Revolution sparked one of the greatest practical and ubiquitous changes in human history. Even more extraordinary than the cultural shift itself, however, is the fact that the industrialization of Britain was well ahead of potential competition for decades. It was not until the early 1900s that historians began to grapple with questions of causality. Max Weber’s pithy answer, “The Protestant work ethic”, indicated puritanical seriousness, diligence, fiscal caution and hard work. Others point to the establishment of the Bank of England in 1694 as the foundation for financial stability.
In contrast, continental Europe wavered from one sovereign debt crisis to the next and then threw itself headlong into the Napoleonic Wars. Not surprisingly, industrialization did not take place until after 1815 in mainland Europe, where it was led by the new country of Belgium.
250 years later, with the introduction of Bitcoin (BTC), another revolution began, but it is more commercial than industrial in nature. Although the full effect has not yet been exhausted, the parallels between these two historical events are already striking.
Bitcoin may not match the obviousness of industrialization, but the pragmatics behind it touches the very basics of the non-exchange economy. Like the creation of the Bank of England, the creation of the cryptocurrency infrastructure was triggered by persistent and deteriorating threats to financial stability: systemic upheavals caused by macroeconomic challenges resulting from the 2008 financial crisis.
If you can’t beat her, join in … right?
Where once a central bank enshrined financial education, it now plays the role of the antagonist. For those who were able to “tie the dots” in 2008, there was the realization that central banks no longer existed as custodians and protectors of national currencies, but as instruments for creating politicized market distortions, abandoning their duty to maintain prosperity in favor of creation became the conditions for limitless, cheap national debt. While many of the underlying intentions were harmless, the process inherently served to punish savers and reward reckless debt.
In the meantime, it has steadily taken the potential of digital assets to reach their potential and approach critical mass, although fortunately full adoption shouldn’t take as long as the industrial revolution in the UK. Over the past 12 years, cryptocurrencies have gone from unknown to new to significant, growing interest. As a result, profound changes are afoot that will affect the mechanisms that investors, the investment industry, wealth managers, and even the commercial banking sector use to deal with cryptocurrencies.
That interest has accelerated as we enter a time of deep economic uncertainty and growing awareness that structural solidity is moving away from traditional investment options. Not only that, this growing financial innovation and public interest has occurred largely outside of the control of central banks, if not an outright contradiction, led by bank regulators in government.
Now many central banks are trying to join a game they have tried almost every possible way, with digital currencies taking on the glitz of crypto-innovation but also shunning the underlying innovations and philosophy that those innovations started out like that popularized with.
Follow or get out of the way
The popularity of the cryptocurrency is largely due to its protean fungibility – it was everything the independent financial community needed, from digital currency to speculative financial instruments to smart contracts that can support smart financial technologies.
As hard as central banks try to co-opt the cryptocurrency hype, cryptocurrency success marks the fundamental end of critical aspects of the central bank monopoly by providing a more competitive tool for facilitating trade transactions and a more stable medium for storing monetized assets. Cryptocurrencies actually offer real returns on cash deposits, which the fiat banking system has long given up. Above all, cryptocurrencies reveal the fictional nature of fiat currencies as a principle.
Cryptocurrencies as an ecosystem will increasingly restrict, redirect and set the parameters for the government’s macroeconomic policies. Certainly, solid alternatives to fiat currencies will drive the latter to the periphery of business life while reducing the number of instruments the nation state has to regulate or respond to changing economic conditions. Above all, this means that government financial commitment can no longer be a rule in itself. It has to get involved on the same principles as everyone else. A level playing field has dramatic effects here.
Against the background of the essential limits of fiat currencies, current geo- and macroeconomic policies and a new emerging world order, cryptocurrencies offer great potential as an efficiency that enables smooth trading and investment, a medium of stability against uncertainty and inflation, and increased value security Transfer and asset management, optimal autonomy in an increasingly intrusive climate, and asset preservation / growth in a world of negative interest rates.
The building that supports the concept of a “global reserve currency” is also weakening. This will reduce the political influence on global finances as well as the ability of nations to run long-term balance of payments deficits, current account deficits and loans with little or no interest. Indeed, given current trends, changes in trading mechanics can quickly lead to such “reserve currencies” having no function at all. The success of the cryptocurrency will accelerate the end of the US dollar monopoly in global trade.
The views, thoughts, and opinions expressed here are the sole rights of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
James Gillingham is the CEO and co-founder of Finxflo. James is involved in the development and implementation of strategic plans and company guidelines, maintains an open dialogue with stakeholders and promotes the company’s success. He is an expert in the management and implementation of high-level strategic goals with more than 13 years of experience in building, developing and expanding multinational organizations. His in-depth knowledge of financial markets, digital currencies and fintech has so far contributed significantly to his success.