Statements sometimes issued by the operators of specific cryptocurrencies explicitly emphasize avoiding both the state and the laws dependent on it.
Private money, or money as a commodity, as presented by the Austrian School libertarians—particularly Friedrich Hayek in his famous work The Denationalization of Money—represents the ultimate realization of freedom in the market and the ideal of laissez-faire. This idea is based on the principle of spontaneous order. According to Hayek, spontaneous order arises from fragmented knowledge, which is distributed among millions of individuals and, therefore, beyond the reach of any centralized, planned order. This order forms within an endless array of realities that no human authority can fully comprehend. It can only achieve stability and guarantee freedom in society and the economy through continuous adjustment and adaptation.
In the words of libertarians, banks, in collaboration with governments, manipulate interest rates and the real value of money, which the state monopolizes for various reasons. This manipulation sends misleading information to market participants, influencing their actions. By acting on this false information, business owners disrupt market coordination and the overall economy, leading to bankruptcy, unemployment, and inflation.
In The Denationalization of Money, Hayek views money as a social institution that emerges naturally. Since it’s unlikely that governments can fully control it, he suggests that “money” should be seen as an attribute that can apply to various instruments. He asks, “Why is a state monopoly on money necessary?” and notes that economists have not yet provided a satisfactory answer. Hayek argues that private enterprises should have the ability to produce and distribute their currencies, which, like any other commodity, would be valued through competition with other currencies. The most stable and attractive currencies would be freely accepted by society, while others would be phased out.
Private Money: A Prelude to the Dissolution of Governments
Hayek himself admitted that his idea of private money was so radical that its realization would lead to the complete dissolution of the state. Thus, the state stands as a strong barrier to this idea, not for economic reasons but for entirely political ones. However, conservative libertarians like Hayek never sought to abolish the state. Instead, they accepted it as the guardian of “legality,” which they saw as a moral precondition for defending the free market. They advocated for a minimal state, which, in Hayek’s terms, should be subordinated to nomos—the law of freedom. These states, which have refused to recognize cryptocurrencies as a medium of exchange formally, only accept digital currencies cautiously as a tradable commodity valued in official currency terms.
“The root problem with conventional currencies is all the trust required for them to work. We have to trust the central bank not to debase the currency, but the history of fiat currencies is full of breaches of that trust. We must trust the banks to hold and transfer our money electronically, but they lend it out in waves of credit bubbles with only a fraction of reserves. We have to trust them with our privacy and trust them not to let identity thieves drain our accounts. Their massive overhead costs make small transactions impossible.” -(Satoshi Nakamoto, Creator of Bitcoin)
If Hayek were alive today, he might view cryptocurrencies as an approach close to his radical concept. In The Denationalization of Money, he identifies the monopoly of “legal tender” as a political tool that, while often lacking economic justification, allows governments to subjugate citizens and compel them to accept something in contracts they do not freely choose. In Hayek’s view, the state used the term “legal tender” to define money, convincing citizens of its necessity, when in reality, “money” is merely an attribute that can apply to different instruments rather than a unique object.
“Bitcoin is the beginning of something great: a currency without government oversight, a necessary and inevitable development. However, it will take a long time to build trust in it.” -(Nassim Nicholas Taleb)
States as a Necessary Evil
Hayek’s theoretical framework did not aim to eliminate the state; he accepted Thomas Hobbes’ concept of the state as a “necessary evil.” He also praised traditions as safeguards of freedom against state power. On the other hand, cryptocurrencies are the dream of individualist anarchists—a branch of libertarianism that seeks to free individuals from all forms of state, traditional, and ideological domination. In Hayek’s framework, which advocates both for the necessity of a minimal state and the ideal of private money, cryptocurrencies present a paradox that seems difficult to resolve. However, does this prevent the state, as the highest organization, from having its aspirations? The rise of cryptocurrencies and their increasing diversity may lead to a space of anarchic interaction that necessitates the formation of a new social contract and a redefinition of the state’s presence.
“Instant transactions, without waiting for check clearance, without account freezes, without international transfer fees, without minimum or maximum balance limits, available worldwide, without waiting for business hours to complete a transaction, without waiting for account approval, setting up an account in seconds as easily as sending an email, without the need for a bank account, usable by the extremely poor and the extremely rich, no printing presses, and no inflation! It sounds like the best payment system in the world!” -(Trace Mayer, Bitcoin advocate and expert)
In this new social contract, although the state is prevented from interfering in the production of cryptocurrencies, its monopoly on using force is considered necessary to guarantee a competitive environment. In these new conditions, if the emergence of cryptocurrencies is seen as a direct threat to the state, their growing diversity may be perceived as a less risky challenge. But why would phenomena, all rooted in different strands of libertarian theory—from conservative libertarianism to anarcho-capitalism—and crypto-anarchists, whose philosophy is to escape state control over wealth generation in the digital space, seek the involvement of a minimal state in the market for regulation, lawmaking, and dispute resolution? The answer is that these phenomena have no desire to open the door to state involvement in the blockchain space. The statements occasionally issued by the operators of certain cryptocurrencies explicitly emphasize avoiding the state and the laws dependent on it.
From the Idea of Abolishing the State to the Necessity of Its Return
Reviewing these statements strengthens the suspicion that their purpose is not to herald the citizens’ liberation from the state but to warn them against a desire for state oversight of the market. This reaction indicates such a desire exists. This inclination leads citizens, eager to invest but fearful of corporate misconduct, towards the state. On the other hand, the state cannot resist the temptation to harness the value created by cryptocurrencies and the economic benefits they bring to the national economy. Now that cryptocurrencies have become an integral part of financial markets and the global economy, citizens and states are rediscovering each other; after all, official recognition, the protection of property rights, and rejecting non-state monopolies are impossible without the state.
Using Hayek’s theoretical language, although the starting point of cryptocurrencies was the realization of the idea of private money (considering all its differences from what Hayek proposed in The Denationalization of Money), it appears that the current endpoint is not the dissolution of the state, but rather a return to the necessity of the state, at least in its minimal form. Thus, in the proliferation of cryptocurrencies, the state feels less threatened than it would if one or two exclusive cryptocurrencies emerged as parallel organizations. The more numerous and competitive the organizations, the more it strengthens the state’s unique position to stand above all of them—with its monopoly on official recognition.
“Bitcoin is not a speculative investment, even if some treat it as such. As the Bitcoin network grows, so does its value. When people enter the Bitcoin network for their payments and transactions, they do not use the U.S. dollar, the Euro, or the Chinese yuan, which, in the long run, will reduce the value of these currencies.” -(John McAfee, Founder of McAfee Antivirus)
