In an op-ed published this week, noted economist and American Institute for Economic Research Editorial Director Jeffrey A. Tucker suggested that governments and central banks should maintain a hands-off approach to cryptocurrency and other innovations.
He began by noting the Federal Reserve’s decision to forgo any plans for a so-called “Fedcoin” digital currency. According to Tucker, that was the right move:
“My own view: this is the right answer. The Fed should focus entirely on the soundness of the dollar and the banking system. Innovations like cryptocurrency and the growing infrastructure associated with it are the business of private enterprise, not government and official institutions.”
Tucker took issue with recent recommendations that suggested European governments could better “anticipate and manage anticompetitive behaviours” in the cryptocurrency industry if European central banks developed their own digital currencies. Tucker countered that suggestion by arguing that central bank-created digital currencies not only wouldn’t compete in the crypto markets but would likely “achieve the opposite of the stated goal.”
To illustrate his point, the author noted how central banks have eliminated currency competition:
“More than a century ago, most government in developed economies created central banks to manage an official currency, directing all commercial traffic through its portals as a way of controlling economic life. It was the end of currency competition and independence in the banking industry.
Elites believed they knew best, and were so sure that they drove out all private monies and unofficial banks. The age of controlled money had arrived — and with it, world wars, depression and inflation, enormous government indebtedness, and the rise of leviathan states that learned to print their way to power and riches.”
According to Tucker, government complaints about alleged “anticompetitive behavior” in the cryptocurrency industry seem “strangely Orwellian” – especially when one of the chief criticisms of the space is that there is so much choice.
Tucker suggests that governments could better manage their time and efforts by focusing on fixing their own monetary systems, deregulating, and lowering barriers that currently prevent useful competition and innovation.
The article concludes by observing that governments and central banks played no role in creating or developing internet commerce, mass adoption of email and messaging, the P2P gig economy, or the application-driven economy. Instead, Tucker argues, “All the innovation in my lifetime, and probably since the moon landings of old, has come from the private sector.”
His advice for government and central banks? It’s simple:
“When the private sector is innovating, government and central banks should leave them alone.
And an even better rule: if you didn’t invent it, and you made no contribution to making it more valuable, you can’t regulate it either.”