Why Google’s investors may want it to issue its own cryptocurrency

Let’s say a certain individual or corporation has generated a lot of value for society.  Its quality of product, service, or information is consistent. There is increasing demand for its product. Customers are enamored with anything affiliated with the product.

Now suppose this high value individual or corporation leverages its value by issuing a digital coin of its own. In the beginning it accepts this coin only along with fiat cash. During this phase, the issuing corporation decides to accept digital coin from other high-value corporations, say Amazon accepting Google-issued coin and vice-versa.

Other producers from manufacturers to farmers to utilities rather than issue their own coin or mine other types of coin may decide to accept coin issued by high value corporations, again based on the premise that the products, services, or information produced by these corporations is consistent.

To further maintain the value of the coin, these corporations would act like mini-central banks, capping the amount of coin made available and driving up the coins price. They could also increase exclusivity of their product by prohibiting the exchange of their coin for fiat cash.

I suspect the wealth class would like a wide moat around their investments. The ability to move their transactions to cyberspace and become mini-sovereigns with favorable tax treatment will be topped off by creating their own “consumer resort.”

And the four week fall in cryptocurrency prices helps allowing them to either short cryptos or merely pick them up on the cheap.

We may be at the beginning of a different type of fork where the wealthy will enjoy cryptocurrency derived from a decentralized platform while the “information poor” are stuck with a digitized fiat currency. It is still to early to see if that scenario plays out since, at least in the United States, the federal government has made no decision to regulate cryptocurrency as anything else but a payment system and there are no plans right now to develop a “fedcoin.”

 

Decentralization like anarchy is threatened by a fear of vacuum

China is increasingly its crackdown on the production of cryptocurrency including Bitcoin. Last year China prohibited the issuance of new cryptocurrency and today is taking the attack a step further by shutting down China’s mining network, a network reportedly responsible for 80% of the mining power behind the cryptocurrency production platform. It comes to me as no surprise that a severely centralized political economy would allow a value exchange system predicated on decentralization to go on about its business unchallenged. China appears to prefer nip the decentralization concept in the bud now versus following the rest of the world down the rabbit hole and the eventual violent repercussions.

What cryptocurrency investors in other tax and customs jurisdictions will eventually find out over the next decade is that decentralization or controlled anarchy is a temporary state of societal mind. Probably from the time tribes started to trade with each other and currency, property, trade rules, and contracts were put in place, anarchy has occupied the briefest periods. It takes little time before someone pretends to be Ghengis Khan and wants to “unite” the clans in the name of order and peace. The same thing, I suspect, will also happen with cryptocurrency.

I view corporations as privateers, licensed by government to ensure that government’s tax extraction system works smoothly on a day-to-day basis. Corporations create taxable activities by extracting resources, converting resources into inputs; converting inputs into final products, and selling those final products to end users. End users are employed during the resource extraction, organization, sale process and as employees are converted into payers of an income tax. Employees are also consumers and as such see the income taxes of business firms passed on to them via a sales tax. Corporations are the tax monetizers in the government tax receipts system and as such will do the State’s bidding when the State identifies a threat and calls on the corporation to help fortify it.

One corporation that will be called on to help fortify the State against cryptocurrency attempts at usurping State power will be the utilities. The utilities are the paragon of centralization and provide great game plans for any wanna be monopolist who wants to protect its turf. More important, utilities, especially in tax and customs jurisdictions where distributed generation has not taken hold, will be at the front line of the push back on cryptocurrency. Miners should not be surprised that the State cuts off their electricity. Last time I checked, digital equipment runs on electricity.

Another consideration is how the State will employ broadband providers in their crackdown. I see the State using net neutrality principles to force internet service providers to provide as much information as possible on the encrypted cryptocurrency data flowing across their networks. Net neutrality requires that internet service providers provide consumers with network management information as it pertains to the delivery of their services. I can see the Federal Communications Commission bringing its own action to force these companies to provide them with information on network activity as well.

And what is to stop the further broadening of the Communications Assistance for Law Enforcement Act by requiring that mobile and fixed wire broadband access providers participate where technically feasible in decrypting encrypted messages that contain cryptocurrency information? Congress will have to be moved by continued strategic communications geared to persuading members that the potential use of cryptocurrency by sex traffickers and drug smugglers warrants significant amendment to the Act to cover garnering information on cryptocurrency transactions.

All States are built on centralization. Whether a communist or capitalist model is only a matter of degree.