Lex Sokolin, a CoinDesk columnist, is Global Fintech co-head at ConsenSys, a Brooklyn, N.Y.-based blockchain software company. The following is adapted from his Fintech Blueprint newsletter.
The war over money is reaching a new height.
And yet, the shape of what is to come has never been more obvious. I can’t tell you how the cookie will crumble yet, but I can tell you the ingredients and the flavor. If you are not preparing for this world, your head is in the sand and you will miss a generational opportunity.
COVID has made transparent the playbook of sovereign states and their macroeconomic responses. Students of history will know that money has always been an instrument of the State, and that debt is how you build an Empire. To wage war, you must borrow from the Iron Bank. Taxes are the royal lifeblood, and we are economic appendages for the body politic. In this frame, regulatory licensing is the granting of monopoly power over State privilege. Privilege enforced by the sword.
At times it may be sufficient to regulate reserve banking and oversee money flows with inflation and unemployment targeting. You would bat away at technology upstarts trying to weasel their way into the financial rivers. But sometimes you need to hand out $2 trillion in bailout money for a quarantine that you have mandated. One hand takes, the other hand gives. Sometimes the giving hand allows PayPal, Intuit, and Square to direct money without traditional licensing, because they are faster and more efficient.
But sometimes the money runs out and you’ve killed all the small businesses anway.
The money seems to be doing some weird things these days, if you are a country. Like, some really weird things! For example, the money keeps trying to transform itself into private cash equivalents and hide out in blockchains. Strange new companies, which are definitely not licensed to lend and borrow, keep buying up…