THE RISKY POLITICS OF VIRTUAL CURRENCIES

THE RISKY POLITICS OF VIRTUAL CURRENCIES

The much talk about our world today is about cryptocurrency in particular Bitcoin and Ethereum. 

Only few days ago, smart contract coding company Parity has issued a security alert, warning of a vulnerability in version 1.5 or later of its wallet software. They reported 150,000 ethers, worth $30 million, have been stolen, data confirmed by Etherscan.io. As reported by the startup, the issue is the result of a bug in a specific multi-signature contract known as wallet.sol. Data suggests the issue was mitigated, however, as 377,000 ethers that were potentially vulnerable to the issue were recovered by white hat hackers.

But here's the thing, I actually should and should not be disturbed with all this stories, and I don't think you should either. My thinking is that there’s a good thing about VCs in the market.

It's not that I don't see the problems. I read the same headlines and my conclusion that so many people draw from them, namely that we're all screwed because the problems will always be there and are unsolvable because there are jokers running the country.

But there are remarkable signs of progress, and they've convinced me that our great global challenges may not be so unsolvable after all. Not only are there theoretical fixes; those fixes have been tried. They've worked. And they offer hope for all.

While VCs are of course very different from national currencies, monetary systems and the legal concept of money have evolved substantially over time and will continue to change in the future. VCs should thus not be judged solely based on their current characteristics or on how they compare to current monetary regimes.

I realize that VCs are unique. So you can't simply expect it to work its way through fiat money and offer solutions that’ll work immediately. It has to maneuver through the process of adaption as circumstances change.

From the legal perspectives VCs fall short of the legal concept of currency or money. While there is no generally accepted legal definition of currency or money, the following may be noted:

- The legal concept of currency is associated with the power of the sovereign to establish a legal framework providing for central issuance of banknotes and coins.

Currency refers to the unit of account and the medium of exchange denominated by reference to that unit of account, prescribed by law. In the strict sense, currency refers to the banknotes and coins that are issued by a central authority (for example, the central bank) that has the exclusive right to do so. Currencies are given the status of legal tender under the state’s legal framework, which generally entitles the debtor to discharge monetary obligations with the currency through its mandatory acceptance within the relevant jurisdiction. As such, the value and credibility of a sovereign currency are intrinsically linked with the ability of the state to support that currency.

- The legal concept of money is also based on the power of the state to regulate the monetary system. 

As a legal matter, the concept of money is broader than the concept of currency, and includes not only banknotes and coins but also certain types of assets or instruments that are readily convertible into such banknotes and coins (for example, demand deposits). 

So what this tells us is that the real obstacle is not circumstances but something much simpler that we’ve done it our entire life; taking risk.

Making big changes involves taking big risks, and taking big risks can be scary to some. Overcoming that fear requires guts, but that doesn't mean we can't demand courage from regulators. And given the state of VCs today, there's really no other option.