A Day to Be Thankful for Bitcoin
My last two posts cast doubt on bitcoin’s near-term prospects as a payment system for everyday and even big-ticket purchases. Today brings a haunting reminder of why it is valued, nonetheless.
Eighty-eight years ago, U.S. President Franklin D. Roosevelt signed executive order 6102, which forbade the “hoarding” of gold. If I were smarter, I would have started working on this post weeks ago, dug into contemporaneous newspaper articles and interviewed some historians. But the anniversary crept up on me. Tl;dr: Americans were given less than a month to turn in “all but a small amount of gold coin, gold bullion, and gold certificates owned by them to the Federal Reserve” or else face steep fines and prison, according to Wikipedia.
Reasonable people can disagree about questions of monetary policy, but the civil liberties implications of the order, which was not repealed until 1974, are unquestionably chilling.
“Less than 100 years ago, in the United States of America, it was ILLEGAL to hoard gold. it was ILLEGAL to have a shiny rock in your home. I find that fact astonishing,” the bitcoin user and educator known as 6102Bitcoin said last year on Stephan Livera’s podcast.
That this happened in the Land of the Free along with more recent abuses of civil asset forfeiture laws underscores one reason why bitcoin and other cryptocurrencies, despite being “backed by nothing” and lacking “intrinsic value” (the critics’ words, not mine), are worth something: They are hard to confiscate because wallets are controlled by cryptographic private keys, not a central administrator that can be subpoenaed.
Not impossible, but hard. As I wrote nearly four years ago:
The point is that the government has to throw that person in jail, or perhaps beat him with the proverbial rubber hose, to get him to comply. It cannot unilaterally seize his funds. …
In this way, cryptocurrency claws back a modicum of power for the individual.
This raises an interesting, if unsettling question: Could Uncle Sam try to pull a 6102 on bitcoin? Ray Dalio, the hedge fund manager and (shill alert!) upcoming speaker at Consensus 2021, thinks so.
“Every country treasures its monopoly on controlling the supply and demand,” the billionaire said in a recent interview with Yahoo Finance. “They don’t want other monies to be operating or competing, because things can get out of control. So I think that it would be very likely that you will have [bitcoin], under a certain set of circumstances, outlawed the way gold was outlawed.”
Dalio noted India could be moving in this direction already, and that the public ledger of transactions may allow a government to track down who is holding the asset.
To which a hardened bitcoiner might reply: Come and take it.
Here’s 6102Bitcoin, from the same podcast interview:
I don’t imagine that these regulations or attempts at seizure would be particularly effective for a number of reasons. Firstly, bitcoin can move at the speed of light (with a 10-minute lag). Regulations take time to develop and in most countries a vote would be needed to confiscate bitcoin. Before the vote even takes place most owners of bitcoin would have transferred ownership outside the country, beyond regulatory reach.
Secondly, bitcoin can be controlled by numerous parties who operate under different regulations, making such confiscation unworkable. Finally, bitcoin can be hidden in plain sight and owners can build plausible deniability into the scheme used to hold bitcoin.
For example, some hardware wallets allow creation of a “hidden account” with a second passphrase so when under duress a user could give an extortionist the primary passphrase, which can unlock only a portion of their crypto.
Perhaps fittingly, the anniversary of executive order 6102 falls just after the last night of the Jewish holiday of Passover. Even if bitcoin is never accepted at the supermarket or dry cleaners, if all it does is give individuals a bulwark against unchecked confiscation, then dayenu – that would be enough.
– Marc Hochstein
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