Crypto Is Changing the Global Monetary Order — For Better and Worse

Every technological breakthrough casts both light and shadow. This is also true for Bitcoin and cryptocurrencies. The international financial order has already transformed—and the transformation has only just begun. To understand it, one must study the configurations of crypto.

When Satoshi released Bitcoin in 2009 and gathered the first users around him, many sensed that something significant was happening. It was more of an intuitive feeling than a logical thought.

When I joined a few years later and began to run this blog, that was my impression as well: something is happening that is important and powerful and might change the world; if a revolution truly comes, then it is my duty as a journalist to hit the streets and report.

I never seriously believed it would go this far. Time and again, I was amazed by the growth of Bitcoin and the ecosystem that sprung up around it under the umbrella of “crypto”—only to register, a year or two later, with new amazement, that even more had happened.

Bitcoin and crypto are changing the international order of money. This is no longer in dispute: Bitcoin has established itself as a store of value and often serves as a means of payment. Stablecoins have become so prominent that even the US Secretary of the Treasury considers them the future of fiat currency. Meanwhile, more and more financial institutions understand the advantages of having stocks and other securities operate as tokens on blockchains. It’s happening.

What started in esoteric niches has become an innovation that will change the world. The tipping point has already been crossed; the development will be unstoppable. Those who sensed this early can congratulate themselves on their intuition—but now also carry responsibility.

The Configuration of Bitcoin

Like any groundbreaking change, there are winners and losers, light and shadow. The technology can serve both the good and the bad.

However, one should not make the mistake of assuming that Bitcoin and crypto are neutral. Quite the opposite. The technology has a specific configuration that advantages some while disadvantaging others:

1. Bitcoin itself is fundamentally opposed to the fiat regime. Bitcoin serves people as a sort of lifeboat against the decline in money’s value. Any state that tries to paper over its fiscal gaps by devaluing its currency must now reckon with the possibility that its people can buy Bitcoins instead, which, due to their fixed supply, cannot lose value in the same way as fiat currencies, and yet can still function as a global means of payment.
2. Second, Bitcoin has a very particular privacy configuration. On the one hand, addresses are pseudonymous, which provides enough privacy to enable online drug markets and ransomware. On the other hand, every transaction links sender and receiver completely transparently, making it possible to uncover the owners’ identities. Ideally, this configuration protects the “small” users while forcing transparency upon the “big” ones.
3. Finally, through Bitcoin, anyone with internet access can store and send value autonomously. This configuration strips power from middlemen in transactions and eliminates all forms of discrimination and censorship. Bitcoin puts all people on equal footing with regard to money. An electronic store of value becomes part of the basic equipment of being human.

Light and Shadow

Within these configurations, one can see much good—but also potential for harm.

• The “fiat regime” is not without its advantages. Money that is based on credit and trust connects people and nations; a supply of money that is not fixed, but can increase through credit creation when needed, promotes economic growth and allows central banks to mitigate crises through monetary policy.
• Even intermediaries that exercise censorship and discrimination can have their positive sides. Who, beyond abstract ideals, truly wishes that criminals, blackmailers, and terrorists not be censored or discriminated against? Who genuinely thinks it’s good that such actors should use money on an equal basis? If, for example, Bitcoin helped North Korea to build nuclear missiles—something yet to be determined—and these were then used to destroy hundreds of thousands or millions of lives—can such outcomes really be justified by abstract principles?
• Regarding privacy, Bitcoin could lead to a scenario in which “normal” people who lack a deep understanding of the technology and use it in the most convenient way become completely transparent (an objective of global regulation such as the Travel Rule), while those who know to distribute their Bitcoins among as many UTXOs as possible and use mixers can enjoy privacy. The potential of “privacy for the small, transparency for the large” could invert.

Bitcoin is not neutral, but its individual configurations can be good or bad. This makes Bitcoin a great opportunity—but also a challenge and a responsibility.

Crypto Configurations

The principles found in Bitcoin apply, to a greater or lesser degree, to what people call “crypto”: the entire cryptocurrency ecosystem. Broadly speaking, this ecosystem comprises the following elements:

• Other true cryptocurrencies, such as Ether, Solana, Ripple, or Dogecoin
• Stablecoins, usually pegged to the dollar, like USDC or USDT
• Securities-like assets that are connected with companies or DAOs (Decentralized Autonomous Organizations), such as Leo (Bitfinex), UNI, or LIDO
• Non-fungible tokens (NFTs) that represent artworks, usage rights, or other assets
• So-called Real World Assets (RWAs) that tokenize traditional financial products such as bonds or stocks,
• A daily flood of shitcoins, scamcoins, and memecoins rising and falling,
• But also smart contracts that have become the foundation of a complex ecosystem of decentralized applications (dApps), games, exchanges, and more.

Except for privacy coins such as Monero or some offchain networks like Lightning, most cryptocurrencies, tokens, and dApps replicate the privacy configuration of Bitcoin. While there are minor differences between account-based and UTXO-based coins, the general formula is “pseudonymous, but transparent.”

The same goes for autonomy and equality: all coins and tokens can be self-custodied via a wallet, with internet access as the only requirement for their use.

Differences arise, however, with censorship- and discrimination-resistance. While most native cryptocurrencies (BTC, ETH, SOL, XRP, DOGE) cannot be censored or discriminated against, tokens such as stablecoins are built on smart contracts that allow for such interventions. USDC and USDT, for example, allow their issuers, Circle and Tether, to freeze accounts, confiscate coins, and enforce sanctions. It’s also possible to integrate sanctions and identity verifications into smart contracts—essentially, to program the configuration.

Finally, concerning scarcity—which makes Bitcoin such a good store of value—this attribute is often replicated so much within the ecosystem that it becomes meaningless among most coins. For many, scarcity has been considerably eroded. While classic alternative cryptocurrencies like Litecoin still have a fixed supply, many modern cryptocurrencies allow perpetual supply increases at a low rate, often around one percent. Examples include Monero, Dogecoin, and Ethereum.

Many tokens, such as those issued for use within decentralized apps or the so-called “governance” tokens (which function like shares in a company), actually reproduce the mechanisms of fiat money, which is created through credit and, via inflation, socializes the financing of certain projects. Most of these tokens help founders build their projects and reward users who participate or provide liquidity, but diminish in value steadily.

Opportunities and Responsibility

These briefly summarized configurations of Bitcoin and other cryptocurrencies are important and will become even more so in the future. They are the principles around which the future of finance will revolve.

That Bitcoin and crypto are changing the global financial system is now hardly in doubt. It’s happening before our eyes; microchips have made sand intelligent, AIs like ChatGPT have given devices the power of language, and Bitcoin or crypto are making money a native part of the internet. This change is now something we must reckon with.

To understand how finance will transform, one must understand the configurations embedded within it. These are not neutral, since they advantage or disadvantage certain actors and behaviors. But their outcomes are still undecided. They could change the world for better or worse; they can empower “the big players” or redirect power to “the small.” They could lead to mass surveillance or privacy, impose sensible limits on state finance, or block it in disastrous ways; they could intensify or reduce global inequality.

What the result will be depends on how we use it. As with all monumental change, cryptocurrencies come with opportunities and challenges, freedoms and responsibility.