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Cryptocurrency Wars

Op-ed - Cryptocurrency Wars

I am part of the generation often called the Baby Boomers. We are heading into our retirement years now in large numbers. Baby Boomers for the most part are not familiar with concepts like Bitcoin and cryptocurrencies. They have heard these terms, but it all sounds kind of “crypto” to them.

While there are exceptions for sure, the new technologies driving Bitcoin and other new proposed currencies are more appealing to younger generations. They were raised in the smartphone era, so using a Bitcoin seems more natural to them. It is clear that the movement towards Bitcoin and other digital currencies has a strong appeal to a libertarian mindset. There is a growing concern about centralization of power and a desire to seek “decentralized” solutions to problems.

All this seems to lead to an inevitable culture clash between the old guard financial establishment and this new and growing movement away from the existing financial power structure.

We are still in the early stages of this evolving movement. Most people still don’t think of Bitcoin when doing their financial planning. Baby Boomers have grown up with stocks, bonds, mutual funds, annuities and other establishment-approved savings instruments. If they have concerns about the current financial system, they are comfortable with holding some tangible assets like gold, silver, diamonds, or even artwork for the well-heeled. This is how they diversify “outside the system”. This means there is a tendency for most people to dismiss the idea of Bitcoin or other cryptocurrencies as a passing fad. Something that is popular today, but won’t last.

That may be a mistake if you dig beyond the surface and take a look at the battles going on in the cryptocurrency arena. Baby Boomers may not understand much about cryptocurrencies, but they do understand war. They have seen plenty of wars in their lifetime, and they know that wars are not fought over things that don’t matter. And recent news events suggest we may have some cryptocurrency wars going on right now.

Bitcoin is the biggest and most well-known cryptocurrency. It has become the symbol of the movement to challenge the paradigm of the old guard financial system. Apparently, the old guard financial system has noticed, and it appears they are not excited about a system that exists outside their sphere of control.

While they have not moved to prevent Bitcoin from operating by challenging its legality, it seems like in the last few weeks they are ramping up an effort to marginalize it in the eyes of the public. To keep it in its place so to speak. If you follow the news you notice that all this seems to have started after some comments made by Jamie Dimon (JP Morgan) and Treasury Secretary Jack Lew to CNBC. Secretary Lew was quoted as saying he and Jamie Dimon “share incredulity” over Bitcoin. Dimon was quoted as saying that when governments start regulating Bitcoin “that will probably be the end of them.”

Those sound like fighting words to me. They sound like someone who thinks Bitcoin is just a passing fad and won’t last. But wait a minute. If that is true why would JP Morgan be so interested in filing a patent for a cryptocurrency of their own? This article in The Telegraph describes how JP Morgan filed a patent for “an electronic currency with many similarities to Bitcoin”. They even provide a direct link to the patent filing itself. Interesting.

I wonder whatever happened to that patent? According to M-CAM (a sight that reviews the status of patent applications), it has been rejected. In their review linked above they state,

“However, Mr. Patel might well have rejected the claims because of the ‘On Sale Bar’ rule under 35 U.S.C. Section 102(b), meaning that if the invention has been on sale for over a year then the invention is no longer patentable. Under the ‘On Sale Bar’ rule, the application could be invalid because it closely mirrors Bitcoin with features such as making free and anonymous electronic payments, and Bitcoin has been in circulation since 2009.”

The patent may have been rejected because “it closely mirrors Bitcoin”. If that is the case, JP Morgan couldn’t be happy about that. It might even lead them to put out a not very complimentary public report, as noted here in Entreprenuer. It quotes the report as calling Bitcoin “incredibly illiquid” and “extremely volatile”. But it doesn’t stop there. They add this quote

“At the risk of sounding like a Luddite, Bitcoin looks like an innovation worth limiting exposure to,” Normand says in the report. “As a medium of exchange, unit of account and store of value, it is vastly inferior to fiat currencies.”

Vastly inferior to fiat currencies? Those sound like fighting words once again.

I guess they mean unless it is a cryptocurrency that is establishment approved. After all, JP Morgan filed a patent to have one, right? They must think it has some potential future.

Lately, the news is filled with stories about denial of service attacks on Bitcoin exchanges. Someone out there seems to view this as a war.

What does all this tell us? It tells us that Bitcoin (and the concept of cryptocurrencies) must matter more than many of us old Baby Boomers would realize. People don’t fight wars over things that don’t matter.

Someone obviously thinks there is a future for cryptocurrencies worth fighting for.

Note: this article is adapted from an article on my blog related to monetary system change.