SEver since a mysterious figure named Satoshi Nakamoto first created bitcoin after the 2008 financial crash, cryptocurrencies have mushroomed. There are now thousands of coins in circulation, with names that sound like abandoned intergalactic missions: Libra, Ethereum, Stellar, Auroracoin. Although they differ in their branding, almost all cryptocurrencies share a common fantasy: to take the money supply out of the hands of politicians and bypass the financial institutions that govern the movement of cash across the Earth. But it has recently become clear that cryptocurrencies cannot escape any of these things.

Indeed, the libertarian dream shared by their first supporters seems to be extinguished just as cryptocurrencies have spread to the general public. Stablecoins are indexed to the value of national currencies, while the US Federal Reserve is develop your own digital currency. Elsewhere, the Bank for International Settlements recently gave his support to central bank digital currencies for the first time. These developments overturn the original purpose of stateless money. Even El Salvador’s recognition of bitcoin as legal tender is in the process of being critical by true believers to force consumers to accept cryptocurrency, thus undermining the very principle of choice.

Despite crypto’s futuristic branding, its intellectual origin story is more mundane. The idea of ​​a stateless money supply first appeared in the debates over a common European currency. While the Maastricht Treaty of 1992 paved the way for the introduction of the euro in 1999, it was not the only monetary model on the table at the time. A lesser-known idea, proposed by German economist Herbert Giersch in 1975, envisioned a parallel currency called europa that would circulate alongside and compete with national currencies rather than replace them. Along with other economists from the Société néolibérale du Mont-Pèlerin, Giersch believed that what he called “currency competition” in the title of a 1978 book would gradually distract people from reading them, their francs and their money. of their drachmas.

Giersch student Roland Vaubel, who would help found the Alternative für Deutschland (AfD) party almost four decades later, was drafted by the European Commission to explore the idea. Meanwhile, in 1976, Friedrich Hayek, who was in regular contact with Giersch and Vaubel, published two pamphlets with the right-wing Institute for Economic Affairs. Hayek’s essays – one on “the choice of currency”, the other on “the denationalization of money”- became touchstones for those who wanted to make stateless money exist.

But once it was clear that the euro had beaten Europe, libertarians began to look elsewhere for places to experiment. In the second half of the 1990s, the Internet seemed to offer space beyond national sovereignty and land territory. In 1996, Internet activist John Perry Barlow proclaimed that The “legal concepts of property, expression, identity, movement and context” do not apply online. Some libertarians went further than Barlow and pragmatically observed that old property laws might be safer than ever in cyberspace, where users might escape the reach of national governments and taxes. In 1998, the Mont Pelerin Society’s Hayek Prize finalist predicted that the Internet would “undermine governments’ monopoly on money supply and allow people to choose between different private money providers.”

This view of money without states was captured in a 1997 libertarian manifesto written by investment adviser James Dale Davidson and the Old Times editor-in-chief William Rees-Mogg (father of Conservative MP Jacob Rees-Mogg). Disguised as an airport paperback book, The Sovereign Individual: How to Survive and Thrive During the Collapse of the Welfare State predicted that the Internet would “denationalize” money. People could forgo government-approved legal tender and use intangible “cybercash” instead, which the authors envisioned as “cryptic sequences of prime numbers of several hundred digits.” Cybercash, they argued, “will bring Hayek’s logic to life.”

Their book proved popular with a little-known San Francisco Bay Area venture capitalist. Young Peter Thiel was excited about Davidson and Rees-Mogg’s vision for a nationless digital currency, and in 1999 he launched PayPal, bringing their prophecy closer to reality. Thiel’s business was just the start of what would later become a proliferation of different digital currencies. But in recent months, a less starry future for crypto has become evident. The first flaw in the bitcoin model used by the majority of cryptocurrencies is, ironically, a consequence of its own success. Solving the equations for acquiring new bitcoin (called “mining”) requires large volumes of computer hardware that frequently overheats and is extremely power hungry. The estimates place the annual energy consumption of bitcoin mining between that of Sweden and Malaysia.

And as these “mines” multiply, their operations begin to expand and even overwhelm national power grids. Iran banned bitcoin mining last month after leading to blackouts and perhaps shutdown of a nuclear reactor. Several provinces in China, one of the world’s largest bitcoin producers, have also banned mining, which has led to reports miners moving their equipment to more traditional underground mining sites in Canada, South Dakota and Texas.

Chinese repressions are extension to crypto holdings as well, sending bitcoin’s value plummeting. South Korea recently grasped tens of millions of dollars in crypto assets from its wealthy citizens in a crackdown on tax evasion – precisely what techno-libertarians hoped “digital money” would make impossible. And earlier this month, the US Department of Justice ad he had managed to find and recover most of the ransom paid in bitcoin to the Colonial Pipeline pirates. Traceless money leaves a mark after all.

Chained to Earth by cables and wires, crypto is more likely to live as an extension of the nation-state than as a means of escaping it. Like the goldbugs before them, crypto fans may need to get used to their workhorse being, at best, a new volatile asset class for high-risk hedging rather than a true alternative global currency (even if, even on this point, opinions differ). Most travelers to the crypto craze since its initial peak in late 2017 seem to be drawn not by the possibility of bringing Hayek’s vision to life, but by a willingness to take risks for speculative gains. Indeed, the future of cryptography now looks less like a techno-utopian dream or a libertarian fantasy, than a subordination to what it was designed to overthrow: the nation-state’s monopoly on money supply.