A report, written in Verdict highlights one issue with cryptocurrency that seems to be under-explored. We all envision a world led by crypto, one where we pay for our shopping in Bitcoin and send money to our loved ones in XRP.
Away from banks and government control, we are able to trade freely and keep the money we earn ourselves. However, we must consider what would happen in times of crisis, without a bank or central figure establishing policy, what happens if the country, or the world enters a recession again, how does crypto work then?
Moreover, we have to consider what happens during other times of crisis, such as natural disaster, pandemics etc, without a central control, we could totally lose control.
The report by an anonymous author on Verdict states the following:
“There are problems with regulation and lack of monetary policy. In the event of a recession, if cryptocurrencies were the primary form of currency, there would be no monetary policy available to mitigate the damage. Governments would not be able to set targets for growth and unemployment, or influence their exchange rates to stimulate exports. Recovery from recession would take longer, and it would incur public debt as the only government recourse would be spending more and cutting taxes.”
You can see the full article for yourself, here.
This raises a really good point. In a global recession, in a world balanced on Bitcoin, how would a government set targets to pull us out of the recession? With no real monetary policy, how would debts be dealt with in this instance? Of course, the governments will have access to cryptocurrency too, under this model, who really has control? What if values sink through the recession and suddenly, all cryptocurrency is rendered totally worthless, what steps could be put in place to encourage growth back into values in order to pay off the debts and reverse the recession. Moreover, who develops and implements these steps?
It’s a very complicated topic, one which no doubt the wise economists amongst us have answers for of course.
Cryptocurrencies have intrinsic benefits but sometimes we can let these get the better of us. Perhaps crypto doesn’t hold the answer to this one?