Last February, when speaking at the CEPS Ideas Lab Conference, in Brussels, on “Reconstructing Europe”, Prime Minister Joseph Muscat referred to crypto-currencies. Rightly so, he said that crypto-currency cannot be stopped. Thus, he vouched for its regularisation. Then a few days ago, Joseph Muscat spoke in favour of blockchain when he stated that blockchain does not depend on the country’s tax regime. In simple words, unlike what is happening with our tax regime, the use of blockchain like Ripple (XRP) cannot come under attack from governments or bankers. Thus, he wants Malta to be a pioneer in these two sectors. This means that government is looking positively upon these two sectors.
On the other hand, the general reaction in Malta is responding positively to blockchain but is rather hostile to bitcoin. I am sure that these negative views on bitcoin are in part resulting from a strong international media campaign against crypto-currencies. Bitcoin have been described as a fraud and are soon to disappear. Should bitcoin come to an end, blockchain will not end, as it can still be used in other systems. However, on its own, it is a meaningless and inefficient database. What makes it revolutionary is the fact that it is part of the Bitcoin system.
Blockchain is one of the four technologies that constitutes bitcoin. The four key elements of Bitcoin are: (1) a de-centralized peer-to-peer network (the bitcoin protocol); (2) a public transaction ledger (the blockchain); (3) a de-centralized mathematical and deterministic currency issuance (distributed mining), and (4) a de-centralized transaction verification system (transaction script). These measures are collectively known as “The Nixon Shock”.
Judging from what the prime minister is saying, this government is not afraid of bitcoin. The same cannot be said of other countries. The reason for this fear lies in the fact that bitcoin were created to bring about decentralization in money management and money transfer. With bitcoin, central banks will lose their privileged current power.
In 1971, the Nixon Administration took a series of economic measures that proved disastrous for the common citizen. The most significant one was the unilateral cancellation of the direct international convertibility of the United States dollar to gold. In practice, this brought an end to what was known as the Gold Standard; the printing of the dollar ceased to be backed by the same amount of gold reserves. But for this new system to work, it needed a very strong and centralized international system. Only strong central banks led by the USA could permit paper money not to be backed by the same amount in gold reserves.
This is one of the true reasons why governments of big countries are afraid of bitcoin. Once bitcoin become an effective worldwide currency, the power of the central banks would cease and their paper money would be what it is really is, just printed paper.
Another result of 1971 measures was that world central banks had to become some sort of police set-up supervising the common citizen. Slowly, this system came into collision course with banks owned or at the service of the individual citizen. Banks are no longer truly at the service of the citizen. Slowly, banks are turning out to be against the individual depositor. Even in Malta, complaints against banks are steadily on the increase because individuals are starting to realize the truth; bank customers are no longer in full control of their money. This is the result of the 1971 economic measures.
Even the concept of family, as it was known in history, came under direct attack after 1971. This is the true reason why different American presidents, in particular, those hailing from the Democratic Party, made repeated attacks on the concept of the traditional family. This is being done to keep the dollar afloat.
Perhaps very few people today realize that the current attack - from the Left and its Liberal friends - on traditional family values is heavily linked to the hegemony that banks are trying to establish over individuals. Before the existence of banks, the economy was based on the family. Families were independent of the state. They were the driving force of the economy. Today, this is no longer the case. The driving force are the banks.
Banks started out as something positive. In the past, they were even owned by individual families and were created to lend money to those who lacked the necessary capital to operate in a chosen trade. But in the past four decades, many old traditional family - owned banks have been taken in one way or another by corporate banks.
Thus, it is in the interest of the Liberals to destroy the traditional concept of the family so that the individual citizen is more and more dependent on corporate banks and less on family. The paradox is that in order to achieve their aim, the Liberals have had to join hands with their arch enemies; the Marxists.
Bitcoin and blockchain have the power to destroy this corrupt system. No one can censor this network. There is talk that, with the introduction of more powerful computers, the blockchain logarithm will be broken and therefore, blockchain will no longer be secure. This means that even bitcoin will suffer. But quantum computing will help in rewriting new algorithms, which will continue to make blockchain safe.
Personally, my view is that bitcoin is the greatest revolution since the invention of the printing press. Like the printing press, it has the potential to revolutionize the way society inter-relates. In the long run, it will help the come-back of the city states. Within this scenario, as a small island state, Malta has nothing to lose but all to gain. Therefore, the government is doing a good thing in looking positively to these sectors.
I am sure that this new state will be achieved even if, countries like America and China are seeking to block it. China has all to lose as it is now sustaining the value of the American Dollar with its purchase of American bonds. But China is also starting to take counter-measures. A few weeks ago, it announced that it is starting to buy oil with its own currency, the yuan, and not the dollar and unlike the dollar, the Chinese yuan is backed by similar gold deposits.
Moreover, China is invested strongly in third world countries, in particular Africa, where bitcoin represent their future. Africa is the continent that is currently lagging behind economically. While Asia is becoming an economic giant, the same cannot be said of Africa. Despite its rich mineral resources, many African countries are still considered underdeveloped. Bitcoin can help Africa’s underprivileged go into business.
At the moment, the biggest problem for poor people is how to find money to start a business. The first stage is having an education. This is being slowly achieved. The next step is for these individuals to start owning a smart phone. Bitcoin transaction can be easily effected using such a gadget.
The next question to ask is whether bitcoin and its four main substrata need legal protection? The answer is yes. The impression I am getting is that the main reasons government is interested in regulating bitcoin and blockchain is to encourage the newly prosperous bitcoin investors to pay tax. Up to here, nothing wrong. This is also the role of traditional governments, as perceived after the fall of the medieval city-state in Europe. But there is another ulterior motive. As blockchain is proving to be a success story, governments or better still politicians want to have a cut. If their intention is simply to promote economic activity, then this is all good.
If it is done properly, Malta has all to gain from bitcoin and blockchain technology. Bitcoin and blockchain start-ups will begin swarming into Malta providing plenty of indirect benefits such as more employment and fringe economic benefits that all this brings with it.
The irony here is that our government, while launching a concerted attack on the concept of the traditional family is supporting a system that will be playing a key role in bringing this type of family back into business!