Central Banks’ Smirking Tolerance of Crypto | Cryptocurrencies Are A High-Tech Red Herring Distracting from True Financial Revolution

Since Bitcoin’s emergence in 2009, a chorus of promoters has claimed that cryptocurrencies would overturn the banking establishment. Yet after fifteen years, it is increasingly clear: cryptocurrencies are not a revolution but a high-tech distraction. They are a Conestoga wagon made of silicon—technically impressive but conceptually obsolete. In reality, traditional banking, built on centralized ledgers and fractional reserve credit creation, remains vastly more efficient.

Central banks, for their part, are not trembling. They tolerate cryptocurrencies because they understand what crypto enthusiasts do not: that the true seat of financial power lies in the ability to issue credit, not simply to shuffle "coins" around. Until that monopoly is broken, cryptocurrencies will remain harmless—another asset class for central bank trading desks to profit from, not a threat to their control.

• Centralized Ledgers: The Supreme Transaction Technology

At its core, banking is simply the maintenance of a ledger—credits and debits—recorded centrally, trusted because of the legal and institutional frameworks that support it. This system is astonishingly cost-effective: modern banks can settle millions of transactions a day, at minimal energy cost, through centralized databases.

By contrast, cryptocurrencies operate by replicating the same information thousands of times across a decentralized network, consuming enormous computational resources. Every Bitcoin transaction must be verified through the wasteful burning of electricity known as "proof of work," resulting in an energy sink that dwarfs entire nations (Cambridge Centre for Alternative Finance, 2023). Bitcoin’s network can barely handle 7 transactions per second. Visa processes tens of thousands (Visa, 2020).

The simple reality is that a centralized ledger is the financial equivalent of a modern highway system—smooth, cheap, and reliable—whereas cryptocurrencies are a wagon trail built with space-age materials: no matter the polish, it remains slow, crude, and primitive.

• Fractional Reserve Banking: The True Alchemy of Wealth

The greatest economic engine humanity has ever created is not "currency" but credit. Through fractional reserve banking, a small amount of base money can underpin vast networks of productive investment. One dollar deposited in a bank can support the issuance of many dollars in loans, allowing economic activity to grow geometrically (McLeay, Radia, & Thomas, 2014).

Cryptocurrencies, in contrast, cling to a hard-money idealism more suited to ancient empires than modern economies. Like medieval merchants weighed down by sacks of gold, cryptocurrency systems are inherently rigid. They cannot elastically expand to meet the credit needs of a growing economy.

• Central Banks' Smirking Tolerance of Crypto

Far from fearing cryptocurrencies, central banks and governments view them as a convenient sideshow. Bitcoin, Ethereum, and their offspring have been easily corralled into the existing system: taxed, regulated, traded, and profited from. They have been reduced to casino chips on the balance sheets of financial institutions.

Meanwhile, the true monopoly of power—the ability to create credit denominated in state-backed fiat—remains firmly in the hands of the central banking cartels. Cryptocurrencies do not offer an escape from this regime. They are allowed to flourish because they pose no real challenge. They are simply another asset to speculate on, like pork bellies or gold, and a profitable one at that (Bank for International Settlements, 2023).

The central banks smile upon cryptocurrency not because they misunderstand it, but because they understand it perfectly.

• The Real Path to Financial Decentralization

If there is to be a true financial revolution, it will not come from "digital cash." It will come from restoring the power to create credit to local institutions—small banks, cooperatives, cities, and regions.

During the 19th century "free banking era" in America, banks issued their own notes, responding directly to the credit needs of their local economies (Selgin, 1988). It was not perfect, but it was far more decentralized than today’s globalist banking regime dominated by a handful of central authorities.

Modern cryptography and open-source software could provide the technological backbone for local credit systems without needing the bloated, parasitic machinery of Wall Street and central banks. But for that to happen, there must be a change in law, allowing diverse institutions to issue and manage their own forms of credit.

Decentralization should not mean scattering ancient "coins" across cyberspace. It should mean building networks of local financial sovereignty, ending the monopoly of distant capitals over every community’s economic life.

• In Conclusion

Cryptocurrencies are not the harbinger of financial freedom. They are a sophisticated decoy—an ancient tool wrapped in futuristic packaging. Meanwhile, central banks remain secure, their true source of power—the control of credit creation—untouched and unchallenged.

A real revolution in finance would not worship digital "gold coins." It would shatter the central banks' monopoly on credit and resurrect the local issuance of money. Until then, cryptocurrencies are not a revolution. They are a profitable distraction—a high-tech carnival ride operated by the very powers they claim to oppose.

References:

Bernanke, B. (1995). The Macroeconomics of the Great Depression: A Comparative Approach. Journal of Money, Credit and Banking, 27(1), 1–28.

Bank for International Settlements. (2023). CBDC projects and initiatives. Retrieved from https://www.bis.org/cbdc/projects.htm

Cambridge Centre for Alternative Finance. (2023). Bitcoin Electricity Consumption Index. Retrieved from https://ccaf.io/cbeci/index

McLeay, M., Radia, A., & Thomas, R. (2014). Money creation in the modern economy. Bank of England Quarterly Bulletin, 54(1), 14–27.

Selgin, G. (1988). The Theory of Free Banking: Money Supply under Competitive Note Issue. Rowman & Littlefield.

Visa. (2020). Visa Fact Sheet: Innovation and Payment Technology. Retrieved from https://usa.visa.com/dam/VCOM/global/about-visa/documents/visa-fact-sheet-Jun2020.pdf