“Bitcoin is part of an old protest tradition”

A specialist in economic history, Eric Monnet is director of studies at EHESS and professor at the Paris School of Economics. He received the Prize for the best young economist 2022, awarded by the Circle of economists and The world.

Are cryptocurrencies an innovative project in monetary history?

The bitcoin – in any case as it appeared at the beginning – is part of the continuity of a protest tradition which considers that the State has too great a hold on monetary power. This tradition is old: it was particularly strong in the United States of the 19th century.e century. While European countries had all already had a central bank, the US Federal Reserve only came into being in 1913.

Bitcoin promoters also sometimes claim “free banking”. This current of thought is based on the idea that a monetary system can function without regulation or a central bank. Here again, the reference of the United States of the XIXe century is used, but largely wrongly: if the United States effectively functioned without a central bank during this period, they have, from the middle of the century, set up banking regulation.

Finally, the idea that trust in cryptocurrency comes from the computer code that underlies it refers directly to the role that gold played in the approaches to “free banking”. All this is therefore not so new in monetary terms.

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In terms of the functioning of the financial system, on the other hand, the innovative aspect could be more marked. Thanks to technology, we could see the emergence of decentralized models, for example for loans. Today, large institutions serve as intermediaries for funding, but this has not always been the case. Before the First World War, for example, the majority of real estate loans were carried out person to person, with notaries who ensured the connection. At this stage, however, this use of the blockchain is not the one that has developed the most.

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Are the failures of Terra Luna and FTX surprising from a historical point of view?

These are very classic convertibility crises: as soon as we begin to doubt a player’s ability to guarantee it, liquidity disappears and, in fact, convertibility is no longer guaranteed. This is the same mechanism as during “bank runs”these panic movements that lead to bank failures.

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Paper money took nearly a century to establish itself in France. What future do you see for its digital form?

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