Author: Rastislav Vasilišin
Separation of Money and State is Inevitable
Money is religion.
Or, as the former president and CEO of the Federal Reserve Bank of Kansas in the US, Thomas Hoenig said,
“It’s a faith-based system.”
The US dollar used to be backed by gold. Now it’s backed by nothing.
You have to have blind faith in government that a currency is worth something.
That faith is being tested right now.
Separation of money and state
It is important to realize people got used to the concept that governments or kings issue money.
But, just like in the case of the separation of church and state, keeping government and money separate from each other is essential for a free society.
Ultimately, people will conclude that there’s no apparent reason why governments have to be the sole issuers of money.
With inflation surging worldwide and the government weaponizing currency, people will realize that stateless money is superior to paper money controlled by governments.
Instead of bearing the cost of their government’s ill-conceived actions, people will replace their savings in the state money with bitcoin or another cryptocurrency.
Bitcoin is stateless money by design.
Russians turn to bitcoin for help
Although Russia has been divesting U.S. dollars over the years, Russia’s central bank has been cut off from most of the $630 billion of foreign reserves it stockpiled before invading Ukraine.
The ruble has fallen 60% versus the dollar since the invasion in mid-February. This exacerbated inflation and caused the Central Bank to double its benchmark interest rate, from 8% to 20%, which should crush the housing market.
To put it differently, bitcoin’s utility might not be apparent at a cocktail party in New York, but it is unmistakable during a war when Bitcoin is needed the most.
Russian citizens had no other choice but to turn to Bitcoin as they couldn’t buy US stocks, dollars, gold or silver.
Bitcoin was their only option.
And as they kept buying it on the exchanges, its price in Russian rubbles has hit an all-time high.
That’s direct evidence of the bitcoin’s intrinsic value.
Ukrainian government turns to bitcoin as well
After El Salvador, another government realized the power of currency separated from the state.
We saw the official Ukraine Twitter account post bitcoin, ETH, and tether wallet addresses as the country asked the global population for donations.
According to Elliptic, more than $63 million has been raised so far. At the most elementary level, bitcoin and other assets do not have hours of operation, and they can be transacted 24/7/365.
That’s the beauty of cryptocurrency.
But here’s the interesting part.
These digital assets are less than 15 years old, and it is fascinating to see a nation-state turn to crypto as a nuclear-armed adversary is invading them.
Sooner or later, most governments will realize that money issued by other states are worthless and begin transitioning to bitcoin for foreign reserves.
Holding bitcoin in their reserves will become increasingly appealing. Many nations and private citizens will want to protect themselves from state-based money’s financial impact.
The world is changing quickly.
We have gone from the invention of blockchain technology to solve the double-spend problem to nation-states using cryptocurrency to fund the defense of their country.
As more people turn to bitcoin and cryptocurrencies, the separation of money and state will accelerate.
Wars have often been the triggers for adopting revolutionary technologies. And while no one wants to see cryptocurrencies succeed during a war, this is how technologies are born.