Lets take a look at the journey of money for the year 2021.
In 2021 the money is...
Whether it's the Dogecoin craze, the growing interest in the must-have token, or the ability of Wall Street Bets to price memes like GameStop, we've witnessed a strange amalgamation of finance and popular culture. As skeptical as people in traditional finance and Bitcoin circles may be, we at Money Reimagined feel quite justified. The trend highlights a topic we examine in both newsletters and podcasts: that the monetary system requires a shared belief in its total value. In this reimagined era of money, art, iconography, history, and other cultural products, it is certain that they will unfold to build a sense of belonging and trust among the communities formed around this new system.
A politicized idea
In the last century no one has questioned the nature and structure of our monetary system. The money is issued by the government and managed by the bank. End of story. With the advent of Bitcoin, a new way of thinking suddenly emerged. But for most of its existence, the political class believed they could simply ignore it.
In 2021, that blissful ignorance suddenly becomes impossible. We first saw this in the Infrastructure Bill debate, particularly in the US Senate, when the imposition of controversial tax returns on the sale of cryptocurrencies had the ironic effect of suggesting that cryptocurrencies had arrived in Washington. The fact that lawmakers want to tax cryptocurrencies is a sign that cryptocurrencies are recognized as a long-term prospect and a reliable source of tax revenue. Equally important, while the crypto lobby has tried unsuccessfully to push for change in this more draconian part of the regulations, it has shown that its influence on Capitol Hill has increased significantly. He formed a grand coalition of bipartisan lawmakers to back his preferred amendments and demonstrate that he will be a force for the future.
Around the same time, Washington was talking about stable coins as an alternative to central bank digital currencies. Randall Quarles, vice chairman of the Federal Reserve until he stepped down in November, even argued that stablecoins could build on U.S. power overseas by leveraging private sector innovations that central banks are inherently inaccessible to. This marks the beginning of a heated debate about stable coins in the summer and fall, specifically whether issuers of stable tokens like USDC and PAX should require a banking license.
Finally, in December, the House of Representatives crypto session revealed something none of us would have foreseen a year ago: some very informed questions from lawmakers. It seems that a lot of people in Congress have finally finished their homework on cryptocurrencies.
A question of geopolitical importance
While federal politicians need time to understand the political ramifications of cryptocurrencies and the central bank-led alternatives that helped create them, China's recent rapid developments have caught the attention of academics and think tanks. They acknowledged that Beijing's launch of the electronic digital currency (DCEP) system, which will be rigorously tested in 2021, has the potential to disrupt US dominance in the global financial system.
What few see is that China will also shed the bitcoin mining dominance it has had for years by cracking down on similar operations across the country. This resulted in a huge decrease in the capacity of the Bitcoin network as roughly half of the global hashrate, or processing power, was shut down. But that hash power soon shifted elsewhere, especially the United States. In October, the United States was the world's largest producer of mines. People have been talking about what the increased role of the United States in this decentralized currency will mean for the United States as China pushes its centralized currency solutions around the world.
Speculative power for social innovation
In 2020, the speculative fervor over decentralized funding fueled a flywheel of investment and innovation capital so powerful that it helped us look back over the 12 months leading up to the one-year anniversary of last October's Money Reimagined podcast. This phenomenon is taken to a new level in 2021 when speculation about irreplaceable tokens sparks a wave of ideas about the future of media, art and collectibles, which in turn draws more money into space. It all seems like a bubble, but it's also clear that speculation in this case is a feature, not a bug, a powerful change engine - even if we still don't know where these changes will ultimately lead us.
Dinner party conversation
Perhaps the biggest topic of 2021 is simply how they become crypto mass in terms of public awareness. With the spirit of the NFT era, the price of tokens soaring, the fact that Washington was more interested in knowing it, and the idea that Bitcoin was a bet against a failing monetary system, crypto was suddenly ubiquitous. Everyone wants to know. Meanwhile, many people who understand, as well as many who don't, are forming strong views on the pros and cons of crypto. So be warned, if you are sitting down for a festive family dinner, an explanation may be asked.