A contest to control crypto

Gillian Tett (Financial Times) makes an interesting contribution to the crypto currency debate (link here) using Niall Ferguson’s metaphor of the “Square” and the “Tower” to examine the contest for who controls crypto.

Worth reading in full but here is a flavour of her observations…

Where does this leave the crypto “square”? In China, I suspect it will gradually be crushed. Beijing seems intent on using CBDCs to centralise power. In Europe, the “square” may be curbed by bureaucracy.

But the really interesting issue is what will happen in the US, a country that venerates free-market ideas and network-driven innovation. “American cultural values — from support for the underdog to adulation of the frontier explorer — seem to be the precipitating source of how crypto is changing our concept of money,” notes anthropologist Sara Ceraldi. Don’t count out the crowd.

Either way, the point is that nobody can explain crypto prices or other meme assets with monetary economics or portfolio theory alone. The power and culture of “squares” and “towers” matter. Rarely has finance been so fascinating or so hard to model with maths.

Gillian Tett, “A contest to control crypto is underway” Financial Times 24 June 2021

Tony – From The Outside

Author: From the Outside

After working in the Australian banking system for close to four decades, I am taking some time out to write and reflect on what I have learned. My primary area of expertise is bank capital management but this blog aims to offer a bank insider's outside perspective on banking, capital, economics, finance and risk.

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