Make Virtual Currencies Illegal!

The European Central Bank reportedly wants the EU to tighten controls over virtual currencies, as they fear they might otherwise lose control of the money supply.

I agree that law makers should indeed create new rules for virtual currencies - and even make them illegal. But I might have a different understanding than the ECB what a "virtual currency" is. Bitcoin, Dash, Steem and other decentralised digital currencies are not "virtual". They have a real value.

You need the Bitcoin currency to use the most advanced payment network that has been built by humans yet. You need Dash to secure your anonymity. You need Steem Power if you want to have a say on Steemit. All these currencies are accepted by humans voluntarily because they have a value for them.

There is no such thing as an "intrinsic value". Every good or service only has the value that people subjectively assign to it. Precious metals such as gold and silver have been functioning as money for several thousand years because of their special qualities: they are scarce, fungible, divisible, transportable and durable. 

Paper money was introduced as a mere receipt for real money such as gold. People would only accept those pieces of paper as they could be exchanged for real money at a bank. Governments abolished the gold backing of paper money when the first world war started, as they could only fund it by printing unlimited amounts of money: virtual money with no backing and no real value. The only reason why this new form of money was accepted was because the governments forced people to accept it.

The introduction of virtual money lead to hyperinflation and economic crises. After World War II, the Bretton Woods system re-introduced an indirect gold standard: only the US Dollar was backed by gold, all the other currencies were pegged to the dollar by a fixed value. Governments could change their US dollars at the US central bank into gold.

This system worked quite well for a while, but then the US government printed more and more money to fund new welfare programmes and the Vietnam war. Other goverments started to distrust the US Dollar and changed more and more dollar bills into gold. The US gold reserves were melting away. Therefore on August 15, 1971, President Richard Nixon abruptly ended the gold backing of the US dollar.

Since then, virtual money rules the world. Central banks can create money arbitrarily out of thin air. The money supply has grown like cancer cells and so have government debts. Because of the money supply's inflation (latin for "blowing up"), prices go up and the value of people's savings shrinks, especially when interest rates are manipulated by central banks to be low to "stimulate the economy". 

Here is a nice video by Dominic Frisby and Pola Gruszka that explains the virtual or Fiat Money system well:

Virtual money is evil. It redistributes wealth from normal people to the ones who are close to the source of money - politicians, bankers and people who have good relations to the government.

This malicious system needs to be ended. So I suggest that law makers in Washington, London, Berlin, Brussels and elsewhere make virtual money illegal and shut down all central banks. There is no need for them anymore.

We now have money that is being accepted voluntarily by people and is backed by the laws of mathematics: cryptocurrencies such as Bitcoin, Steem and all the other forms of good, hard money, which prove to have a real value for people.

Read more about the flaws of the virtual money system (an excerpt from my book).