back to article Private cryptocurrencies make lousy national currencies: International Monetary Fund

The International Monetary Fund has called on nations to consider using blockchain tech to improve financial services, but warned that dabbling with private cryptocurrencies is vastly risky. A Monday post titled Cryptoassets as National Currency? A Step Too Far opens by stating "New digital forms of money have the potential to …

  1. Anonymous Coward
    Anonymous Coward

    They're a Ponzi scheme. Currencies are backed by the future earnings of the people, Ponzi schemes are backed by pulling in more sucker money to pay the people who exit.

    If they fail to pull in the sucker money increases to cover the people exiting, the 'currency' collapses. NFT are part of the smoke and mirrors, you're supposed to think if everyone sold off, there would be something left of value, but there would not.

    ***** The reason people wanted them was for banking. The ability to pay someone somewhere without some creep controlling if that's OK with them. There have been many many such things like this, take Paypal as an example....

    Paypal Mk1: You can send money to anyone with an email address in an instant.

    Paypal Mk2: Adds surveillance and arbitrary seizure, now the rule with paypal is don't leave money in paypal because its not "money in the bank". It can disappear at the whim of an employee.

    Who would want Paypal Mk2? Nobody, so the money moves on to the next transaction system, Venmo, or Crypto or whatever.

    As the OECD pushes more and more surveillance and liabilities onto banks and financial institutions, so they become more and more like Paypal Mk2. People do not want this, and so these other systems pop up to fill the void.

    Each system gets attacked (Western Union, Paypal, .... currently Crypto), as 'used by terrywrists' 'used for moneylaundering' where they don't specific the dirt that is claimed to be laundered, or the evidence they have for such a blanket claim. And based on that they poison the transaction system to be effectively worse than the thing it replaced.

    It was done to cash too, remember its a crime to carry lots of Euro notes above a limit, such that *without evidence* it can be confiscated even in the EU, where its legal currency. Even cash has been undermined as a transaction system.

    Meanwhile over in Asia, I can pay any bill instantly quickly, anyone, anywhere, I can walk into a bank withdraw 5 million Baht, go buy a farm in cash, if money fails to make it through SWIFT (4 out of 5 of failures its getting that bad), they apologize, and we send it via another system (there's a messy patchwork of Asia transaction systems) and everyone avoids the wests banking system because its become so shit and unreliable.

    ***** So rant aside, what's the future?

    An electronic interchangable non OECD'd currency, backed by a solid economy. You will not find that in the west these days. You won't find that from the IMF. China is my great hope for seeing the world transaction currency in the Asian model.

    "Money in the bank", has to be "money in the bank", not "maybe maybe-not money". Money sent has to be money received, not a random numpty arbitrary choice.

    Look at this company here:

    https://www.kokpower.com/

    They make batteries that are badged in the US and resold at high markup. They accept Payment of TT/Western Union/Paypal

    IT'S PATHETIC, they don't have a transaction system beyond Bank TT or Western Union or Paypal in this day and age.

    If they had such a system, you don't buy from the US supplier at high markup, you buy direct from them.

    There is clearly a need, crypto is a fake sold as filling that need and it does not. It is a Ponzi scheme.

    DO NOT MIX THE TWO UP.

    1. doublelayer Silver badge

      No, it's not a Ponzi scheme. That doesn't, in itself, make it a good idea, but if you're going to argue against it, do so accurately.

      A Ponzi scheme requires a central entity transferring real value to handle transactions in falsified value. In clearer terms, someone has to run the scheme and commit the fraud. Cryptocurrencies do not have such a person. This disqualifies them as Ponzi schemes. In your argument, you said "you're supposed to think if everyone sold off, there would be something left of value, but there would not.", which is correct, but doesn't a Ponzi scheme make. In fact, that statement is true of any other real currency--if we all decided tomorrow that the pound was worthless and sold ours, it too would go to nothing.

      Most cryptocurrencies are bad as currencies and weak as investments, with no external worth and hideous volatility due to investor activity. That almost certainly means that you shouldn't rely on them for storing or making money. They aren't fraudulent though.

      1. Anonymous Coward
        Anonymous Coward

        "A Ponzi scheme requires a central entity transferring real value to handle transactions in falsified value."

        The exchanges and the miners drive the fraud, often one and the same but they don't need to be.

        "This disqualifies them as Ponzi schemes." add ....'your honor' to that. It's good practise.

        "if we all decided tomorrow that the pound was worthless and sold ours, it too would go to nothing."

        *Less* than nothing, tokens collapse long before a full sell off. As it goes up in 'price', so it takes a smaller sell to collapse it. A token with an fixed inflow will collapse faster the higher the apparent price, and the more people are on the owners side, the easier it is for the exit to collapse it.

        No central bank to step in, no ability to borrow from future generations as collatoral. Nothing of value there to stop the collapse. Nothing unique there, just a set of numbers, non-unique in any number of non-unique schemes.

        "They aren't fraudulent though." again, add 'your honor' to that.

        1. doublelayer Silver badge

          "The exchanges and the miners drive the fraud, often one and the same but they don't need to be."

          In fact, if you're attempting to prove that it's a Ponzi scheme, then they not only have to be, but their activities have to be fraudulent, not just worthless and speculative. The term has a meaning and it's quite specific. It does not mean "of dubious value" no matter how much you try to define it thusly. A Ponzi scheme is a method of someone stealing your money, not of you throwing it away. Cryptocurrencies frequently are the latter.

          1. Michael Wojcik Silver badge

            It's likely Ponzi himself didn't realize his scheme was fraudulent. He was poorly educated and largely innumerate. No doubt some of his collaborators did understand what was happening, but Ponzi himself would have kept running it and believing he was offering a valid investment right up until he noticed the money running out (which would have been rather late in the day, since his accounting system was basically "shove currency into boxes").

            Whether an unsustainable scheme that pays investors out of new receipts is actually fraudulent if there's no intent to defraud is a question of definition. But the eponymous Ponzi scheme was the result of incompetence, not malice.

            See Bulgatz for details.

  2. Sorry that handle is already taken. Silver badge
    Holmes

    I mean... sure. Those of us paying any attention have only been saying so from the start.

    1. sreynolds

      If you remove the mining and trust the goverment...

      If you signed transactions (ie. each "block" was signed by the government), allowed for anonymous addresses (zcash type privacy) and backed it with a real promise (like say pay the bearer a few grams of gold) then it could work as a cash replacement. The main problem is this mining.

      1. Sorry that handle is already taken. Silver badge

        Re: If you remove the mining and trust the goverment...

        Yeah there's no need for any of that

  3. doublelayer Silver badge

    Well, duh

    When a country changes or adds a currency, they select something that's been at least somewhat stable. Just looking at the exchange rates between the popular cryptocurrencies and fiat ones over the past couple years confirms that one of them isn't stable, and living on Earth confirms which one that is. No sane country would look at that and decide to make one of those an additional currency. The closest they might get is using it as a short-term payment method, but few would be desperate or experimental enough to try that either. Most common cryptocurrencies are doing a terrible job as currencies, and everybody knows this.

  4. Pascal Monett Silver badge
    Stop

    "New digital forms of money have the potential to provide cheaper and faster payments, enhance financial inclusion, improve resilience and competition among payment providers, and facilitate cross-border transfers. "

    I think I have a better idea than creating an ideal environment for criminals : change the banking environment so the public doesn't need such funny money schemes in order to easily transfer money from one person to another, or from one country to another.

    We've done it Europe, you can do it too.

    1. Julz

      Hum, ever tried to 'easily' transfer a few tens of thousands of euros?

      1. Aleph0

        That's by design

        If you can easily transfer such large sums out of your account, so can a scammer that has compromised your credentials or has "persuaded" you (e.g. with the proverbial $5 wrench) to initiate such a transfer. Sadly many regulations that appear nonsensical to an outsider have an historical reason in some horror story...

        So – at least at the bank I work for – large outgoing amounts are flagged, and a second pair of eyes (i.e. usually the branch manager) has to manually authorize them after having checked with the client that everything is in order, because once the funds have left your bank there's little that can be done to reverse the transfer.

        BTW when I paid for my current car the 30k euro transfer got through in ~30 minutes. I had already told my branch manager that I would be doing such a payment, and luckily the car dealer also had an account at my bank, so no clearing was needed.

    2. scrubber
      Headmaster

      "ideal environment for criminals"

      99.99% of criminal activities use cash. And that's before you add in the white collar criminals on Wall Street.

  5. Howard Sway Silver badge

    New digital forms of money have the potential to provide cheaper and faster payments

    This is where its' scamminess becomes clear for me, and shows it's intended just to rope in individual punters as mugs. If you're an actual business, the cost of a payment is irrelevant compared to general business bank account charges. And as for "faster" - when was that ever an issue? Most businesses settle credit invoices a significant time later than the time of the actual purchase. So what is the point of risking massive volatility by taking on debt in a cryptocurrency, when a pound you owe today will be worth exactly the same as a pound you earn tomorrow? You would almost be obliged to buy the crypto at the same time as making a purchase to insure aganst volatility, the same way companies trading across borders hedge on holdings of multiple currencies.

  6. 89724102172714182892114I7551670349743096734346773478647892349863592355648544996312855148587659264921

    Wish I'd dropped a huge chunk of change on Bitcoin before the pandemic, and cashed out at the start of mass vaccinations...

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