On October 31, 2008, a research article titled ‘Bitcoin: A Peer-to-Peer Electronic Cash System’ appeared on the Internet; it was written by Satoshi Nakamoto. The world soon realised that Satoshi was a pseudonym and the search for real Satoshi continues.
Satoshi proposed a peer-to-peer payment system “without going through a financial institution”. While the paper does not criticise the role of financial institutions in the financial crisis, the timing of the release made the intention clear.
Part I and Part II of this series narrated how money eventually became a centralised government-controlled activity. Some economists kept questioning this centralisation. In 1976, a leading Austrian school economist and Nobel laureate Friedrich Hayek wrote an article favouring denationalisation of money. The liberalisation phase of the1980s and the 1990s across the world led to the exit of governments from quite a few sectors of economic activity. However, the monetary activity of issuing money and setting interest rates remained with the central banks. People continued to trust their banks and central banks — till the 2008 crisis.
The 2008 crisis shook that central pillar of the monetary system: trust. All these years trust was taken for granted and most researches did not even mention the word trust. Post-2008, economists started to scramble for it. Even the Bitcoin article mentions the ‘trust’ 14 times, which is rare for a technology-based article.
However, history also tells us the mistakes humans make while mistaking hubris for confidence. History beckons humanity once again and we have to wait and watch which side of history will the CBDC project lie.
(This is the third and last in a three-part series on the evolution of money. Please read Part I here and Part II here.)