Bitcoin mania: private currencies are nothing new

The idea is gaining ground that bitcoin and the plethora of other new currencies are here to stay. But the existence of private currencies operating parallel to official ones is nothing new, says Merryn Somerset Webb.

This week is all about cryptocurrencies. In the US, crypto platform Coinbase is listing. Bitcoin is hitting regular new highs (around $64,000 now) as is ether (up 6% on Wednesday alone). And the idea that these new currencies are here to stay is gaining ground. They might be. But before you rush out to buy too much of them (John and I both have smallish holdings – we like to hedge our opinions) bear in mind that while the tech behind digital currencies is new, the existence of private currencies operating parallel to those issued by national authorities is not. 

Take the tokens that circulated in 17th century London. Post-civil war – and the removal of the Royal Prerogative to mint base-metal coins – there was a shortage of state-issued small-denomination coinage available (not good for trade!). Market forces stepped in (of course!). Shopkeepers and innkeepers commissioned “moneyers” to produce personalised coins, then used these to issue change. By 1672 some 4,000 separate coins were thought to have been struck and passed around in London. They worked: as long as all merchants trusted that the merchant named on the coin was good to eventually redeem the coin for goods, that it was not state issued was not a problem. Unless, of course, you were the king, Charles II: he reckoned that private currencies took a bite out his “royal authority” and banned the lot. You may think this quaint little story of pewter tokens representing the odd half pint of beer has no bearing on your bitcoin holding. You may be right. But if you think of a cryptocurrency as a representation of value that skips a state-sponsored middle man, that can be produced by anyone and – if it has the trust of a critical mass of people – that can be used for trade by anyone, what is the real difference? Perhaps it’s just the fact that not all modern authorities are quite as confident in their power as Charles II. Yet. 

For more on how money might evolve in a world where we attribute purchasing power to computer code, see China’s new digital currency. China’s government has a bit more of the Charles about it than most of the West: it might be first to suggest that its citizens should use the state-sponsored centralised digital yuan over any decentralised cryptos. 

On to a genuine modern development. I’m slightly nervous of the alternative meat sector (I worry about the health impacts of highly-processed “plant-based” meats) but in this week's magazine Jim Mellon and Anthony Chow make a compelling case for “cellular agriculture” as the best hope for the future of food – and, crucially, for animal welfare.

As podcast guest Peter Spiller of the Capital Gearing Trust tells me this week, when money supply is growing fast and people are confident, risk asset prices mostly rise (short term at least). But we still reckon that with prices where they are, if you are buying you are better to buy at the less costly end of the market – perhaps stick with the UK (only Italy and South Korea are cheaper). Finally, as we move into the part of the pandemic when we start to get a sense of who are the lockdown wrecked and who are the lockdown winners, it’s worth remembering who’s done best this year – American CEOs. Their average pay is up by a million bucks-odd a head and they seem to have spent even more time than usual going on holiday by private jet. Nice work if you can get it.

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