It is not (as the term “cryptocurrency” misleadingly implies) that Bitcoin is beyond the reach of the law or the taxman. When the Federal Bureau of Investigation busted the online illegal goods market Silk Road in 2013, it showed how readily government agencies can trace the counterparties in suspect Bitcoin transactions. This is precisely because the blockchain is an indelible record of all Bitcoin transactions, complete with senders’ and receivers’ bitcoin addresses.
Moreover, the Internal Revenue Service is perfectly prepared to demand information on bitcoin accounts from exchanges, as Coinbase discovered in 2016. A rumor of new U.S. Treasury regulations requiring greater disclosures by exchanges caused a sharp crypto selloff over Thanksgiving. The point is simply that the financial data of law-abiding individuals is better protected by Bitcoin than by Alipay. As the Stanford political theorist Stephen Krasner pointed out more than 20 years ago, sovereignty is a relative concept.
Rather than seeking to create a Chinese-style digital dollar, Joe Biden’s nascent administration should recognize the benefits of integrating Bitcoin into the U.S. financial system — which, after all, was originally designed to be less centralized and more respectful of individual privacy than the systems of less-free societies.
Life in the East End of Glasgow in the 1980s was nasty, brutish and short of money. But all those transactions in grubby pounds and pence — genuine shitcoins — were, if nothing else, private. If Agnes Bain bought Special Brew instead of oven chips, it was a matter for her, the shopkeeper, and her long-suffering kids; the state was none the wiser. That was scant consolation to poor Shuggie. But, as we have learned again this year, a free society comes at a price that is not always payable in cash.
Niall Ferguson is the Milbank Family Senior Fellow at the Hoover Institution at Stanford University and a Bloomberg Opinion columnist. He was previously a professor of history at Harvard, New York University and Oxford. He is the founder and managing director of Greenmantle LLC, a New York-based advisory firm.