I’m still spending a fair amount of time trying to dig into Bitcoin and understand both the technology and it’s consequences. An interesting question I came across is, what is Bitcoin’s impact on interest rates and tax policy if it were to become a truly global currency? It is the first currency without and interest rate, which is unheard of until now. How do monetary and fiscal policy evolve in developed countries like the US, China or the EU? Will the power of the fed diminish? What about fiscal policy? How does the US or any other government collect taxes on a currency that is not backed by their or anyone else’s government? As soon as you start to talking about governments losing their power to tax citizens and set interest rates things get VERY interesting.
While this scenario seems far fetched in the developed world that is not the case in developing countries like Kenya, which already has a one of the most mature mobile payments network in the world. There are also a number of small countries who are not capable of managing their own currency like Cyprus, Panama, the Bahamas (to name a few) that would also make great candidates. Another interesting possibility is Iceland. The Krona has a rocky history at best and badly needs a new stable currency following its collapse during the financial crisis of 2008. There are clearly a number of major hurdles that Bitcoin has to cross before sovereign nations would even consider adopting it, but I believe they are on the right track. Accordingly, I expect to see it evolve into a major player on a macro level in the next 5-10 years.
I should add that at Bitcoin’s total current valuation it is nothing more than a blip on the radar when compared the the value of the US dollar, (the total value is currently just over $7.5bn in US dollars) but isn’t that how all disruptive technologies started? I think it’s important we at least begin trying to understand Bitcoin's impact on a macro level, otherwise we'll risk playing catchup.