Why Australia needs to issue its own Crypto Dollar but most likely wont and how the global currency will come about

In the spirit of the weekend I am going to take a detour today from focusing purely on writing about Konkrete and am going to talk to about a few high level things.

Someone I know well runs a cleaning business in Melbourne, he (like a number of other small businesses) prefers getting paid in cash. The reason is simple, cash is not on the books and I am not completely sure if he reports it in his income come tax day.

But the fact is an increasing number prefer not to carry cash in our leather wallets. Businesses that do not accept cards lose customers. But that brings us to an interesting point, as crypto gets more prevalant and acceptance in day to day payments people will start doing more transactions using it purely as a tax dodge. Why pay GST and report income if you can get away with it.

It is pure human nature and we risk fooling ourselves by not recognising it.

That is where States have the opportunity to preempt this by issuing their own crypto currency. Blockchain keeps an audit trail of all the transactions, and it gives the state a visibility into how the money is moving, tax it and better inform policy decisions on where public spending needs to happen. It can short circuit any attempts to dodge taxes, reduce administration costs for the state by auto collection through transaction fees and generate more revenues by eliminating leakages.

However I have no faith that any major country will have this foresight and move fast enough to preempt what is likely to happen.

Australia is in a unique position, this is a country small enough to be nimble yet it has one of the most advanced, transparent and well respected financial systems in the world. An Australian Crypto Dollar will command respect globally.

But there a few important consideration that any digital currency needs to satisfy.

State backed currency is pretty much printed on whim. Compared to all the token economics and thought that goes into ICOs, fiat money supply is a laughable thing where a few wise men gather around a table in a closed room and make decisions as they seem fit.

For any state issued crypto to be acceptable the state has to cede control of its day to day operations. It can lay down the rules and collect fees but it cannot change the rules on the fly. The users of the currency would have a direct say in any proposed changes in the money supply. The decision making processes have to be well defined, predictable and transparent. The currency has to be truly decentralized with the state collecting a toll but nothing more.

A state issued crypto coin that follows all these rules is a long shot. What we will see instead is desperados like Venezuela attempting to issue asset backed Petro coins. What they dont understand is if you dont trust the government why would you trust a currency which they claim is backed by its assets.

What will happen instead is the global currency will originate in a country where the credibility of the state in economic matters is shot. It will likely not happen in totalitarian countries like China first as they have heavy firewalls on their internet with which to control the flow of data.

My bet is it will likely happen in democratic countries like India, where the population is young, tech savvy and we have a Prime Minister who thinks it is a smart idea to take out 85% of the cash out of an economy which runs almost exclusively on cash. Better still the decision is made in the dark of night without any warning or any planning.

Yes, the Indian state will react and try to stamp it down but neither is it as well resourced to control it nor is it (yet) a totalitarian state.

I don’t think it will be Bitcoin either due to the well known problems that prevent its use as a means of exchange. What we will instead see is a new coin emerge from the chaos and then seep across borders as people shift to crypto to take their money away from the states grubby hands.

One way or another the whole world is moving to Blockchain. And in the words of Tyrion Lannister, “Let us sail on the tide of freedom than be drowned by it”.