August 20, 2020

The first state Bitcoin may emerge in Sweden

Throughout economic history, Sweden has shown that, while humbly assuming its role on a global scale, it is also a truly innovative country in socioeconomic terms.

This time, the new plan being evaluated means that the country has entered the field of cryptocurrency systems. Yes, there are serious political, academic and even social debates in Sweden about whether the country should start ‘creating’ its own Bitcoin.

Although in the context of the global economy, it generally takes a back seat, the fact is that Sweden is a country, which like all countries has made its economic mistakes, but has become a true pioneer in some aspects and has laid the foundations of today’s socioeconomy.

Sweden was the first country to adopt legal tender paper money, i.e. banknotes with no intrinsic value, but banknotes with a nominal value backed by the issuing country. The fact that today we usually see bills or coins prevents us from appreciating the huge and disapproving changes that were becoming legal tender. It is worth remembering that there was a great risk in this matter and the Swedes decided to represent their Swedish krona on paper.

We have recently seen how Sweden has become one of the pioneers in adopting a cashless society. In fact, the country is currently in a public debate on adopting this electronic measure.

The fact is that, regardless of whether it becomes a socioeconomic change or not, Swedes are among the first to consider taking a step in socioeconomic innovation. Irrespective of the final outcome of the debate and the possible reversal of a cashless society, today in Sweden only 2% of GDP is converted into coins or bills in circulation, whereas in the United States, Switzerland or the euro area, the figure is around 10%. In Japan, this proportion has been doubled.

The new Viking Bitcoin is now approaching the coast of Sweden.

Now, the Swedes have once again proved their worth ahead of many other countries in terms of planning and socioeconomic progress. In Sweden, they are seriously weighing up the advantages, disadvantages and risks of creating Swedish Bitcoin.

First of all, we must say that the Swedes are not the first to consider adopting national cryptocurrency. In fact, the first state Bitcoin comes from Venezuela which is not only the first country to consider the issue, it has even decided to issue the famous Petro. This Venezuelan cryptocurrency is anything except serious or unreliable for depositing our savings. This reliability and the ability to adopt it and use it in any transaction is exactly what we need to trust the result of our work effort.

Compared to the lucrative profits in other countries, the proposal to adopt Swedish Bitcoin is more real and serious. That is why we have decided to bring you this analysis now.

A high quality formula with many unknowns

The fact is that the Swedish Bitcoin, just by mentioning it shakes the current members of the monetary equation (such as the traditional banks), we must clear up the unknown that the adoption of a cryptocurrency at the state level implies. This disruptive advance is part of the equation, so there are many possible and disparate solutions. This is the immense complexity of the problem: it is impossible to predict with certainty all the socioeconomic implications that adopting cryptocurrency may have.

Swedish banks are not concerned with the socioeconomic consequences of integrating cryptocurrency, but with the risks it may bring to their traditional business model. It is true that the adoption of cryptocurrency technology has its advantages for everyone, but in that case, the potential impact on your balance sheet and your current strength weighs more heavily.

One of these advantages will be to deepen the trend that started in the Nordic countries with the emergence of a cash-free society. After all, Swedish Bitcoin will be another form of electronic money. E-money and criptocurrency therefore have obvious advantages in terms of user-friendliness, universality, transaction speed and reduced fraud. Obviously, Swedish cryptocurrency will also assume these technical and national security risks.

Other differential factors from the state Bitcoin

There are other new differentiating factors in adopting state cryptocurrency versus e-money. I leave it up to the reader to judge for himself whether this is only good for the states or also for ordinary citizens. The fact is that the state Bitcoin will put the cryptocurrency system in a good position. State Bitcoin will give back to central banks the prominence they now see at risk with the current Bitcoin that is decentralized and completely out of control.

The Swedish Bitcoin, regardless of whether it is considered to be cryptocurrency, no matter how blockchain based it is, will somehow allow the Swedish Central Bank to regain all or part of the control of Swedish currencies that the decentralized cryptocurrencies currently take away from it. Remember that Bitcoin is ultimately software and therefore supports many possible implementations.

There is no doubt that one of the functional requirements of any central bank is to largely control its issuance: that is where its power, influence and ability to regulate the economy comes in, and it must be regulated in some way.

It is an illusion to think that Bitcoin will only bring idyllic benefits and that there are no hidden risks. There are risks, and there is also the possibility that all your money will be stolen and looted. It’s unrealistic to think that the economy can be 100% self-regulating, either in a super-liberal model where there are hardly any agencies or regulatory countries, or in a decentralized model where no one can intervene if a problem needs to be solved.

Bitcoin state is really a good idea?

Some regulations must be enforced and with a decentralized Bitcoin it is almost impossible. The impossibility of doing so is a great risk and will probably end up proving that financial anarchy does not work at all.

I do not intend to discuss whether this financial anarchy will work or not. I just want to say that if it turns out that it does not work, there will be no possible rules for using Bitcoin, and that after the large scale adoption of cryptocurrency technology, the reversal will be difficult and painful, also considering that the financial systems of many countries could go bankrupt within a few months.

In fact, state Bitcoin would mean abandoning many of the most idealistic models of the most visionary cyber-punks of the 1990s. But it is no less true that in the economy, jumping into the void without a network is a big risk. The key question is whether this risk is greater or less than the central bank’s network.

In the face of the overwhelming risk of a possible financial collapse, the state-owned Bitcoin seems to be an ideal solution between the decentralized Bitcoin and the current legal tender. The state-owned Bitcoin will inherit many of the advantages of decentralized Bitcoin (sharing some of the risks) and will inherit some of the necessary features of today’s paper currency.

I can’t deny that some of the disadvantages are the same, but the conclusion is that one of the most important disadvantage is the risk of socioeconomic collapse. There is a real risk that economic history has already realized many times over the centuries, remember that we are now seeing one.

The state Bitcoin admits many functions and technical requirements and many possible levels of decentralization. The problem is not about the state Bitcoin, but how it is finally implemented.

Source: Elblogsalmon