Every Friday, Law Decoded provides an analysis of the week’s critical stories in the areas of politics, regulation and law.
The concept of monopoly will reign in today’s Law Decoded. As a fundamental principle, blockchain technology is about distributing inputs and outputs of information in a secure way. In its still very young life cycle, technology has proven to have unlimited applications based on this very simple principle.
A secondary principle is decentralization, and in this way, blockchain technology seems inherently opposed to monopolies. The great challenge of the Bitcoin white paper was finding a way to move value between the parties without getting lost in that proverbial valley between two Byzantine generals OR the trap of a third party. That does not mean that every company that works on blockchain is founded so morally as to reject the opportunity to monopolize its market. But the technology holds promise for addressing a wide range of concentrated power, especially in a digitizing world.
This week there was an antitrust conflict between big tech advocates and the government. While those encounters were hostile, they probably won’t result in any significant damage to anyone’s bottom line. It also saw some new consequences for the misuse of monopolized monetary power, which is a system that is also unlikely to change very soon. The good thing about a monopoly is that once you have it, it is very difficult for someone else to take it from you. But these are power groups that seem pretty obvious as places you would seek to decentralize.
Kollen Post, Policy Editor, @the_postman_
Governments bring big technologies to antitrust practices
The CEOs of the four American tech riders (Apple, Amazon, Google and Facebook) virtually appeared before Congress on Wednesday to face charges of acting as monopolies.
Thursday’s release of the second-quarter earnings reports shows the increase in revenue for each of the companies, except Google did nothing to win the sympathy of these companies. This was despite CEOs’ efforts during the hearings to represent their companies and their individual biographies as the American Dream came true.
The past half decade has devastated the public image of technology in the United States. Increasingly dystopian disclosures of data collection practices and brutal campaigns to crush competition have led to a widespread backlash against Silicon Valley. The role of social media in the 2016 elections and subsequent waves of disinformation (including COVID-19) also ended any honeymoon period that companies like Facebook and Twitter have enjoyed.
In the meantime, China, whose digital payment providers are widely praised ahead of those currently in use in the United States, appears to be cracking down on those providers based on similar antitrust principles. For China, however, that could be at least in part to clear the way for a broad launch of a digital yuan.
Many of these tech giants are so entrenched that they may be too big to fail. It is undeniable that they provide services that have changed our way of life. As Mark Zuckerberg pointed out during the Facebook investor call last night, if the COVID-19 pandemic had occurred two decades ago, this shift to telecommuting would not have been possible, and many more people would be dying. However, recent events should make many people think if these giant companies are the best we can do and if we could be better served by seeking decentralized alternatives.
… and perhaps the following will be the monopolies of the Central Bank?
Also in the United States, The Federal Reserve printer continues to operate, overcoming the country’s total printing of money during the first two centuries of its existence in a period of one month. The dollar, for the first time during this pandemic, appears to be on the ropes.
Quantitative Easing, the formal term for the Fed’s use of inflation as a source of funds at the expense of all the dollars that already exist, is the recurring villain in Bitcoin’s stories. The idea is that this will ultimately have to result in a monetary collapse.
Extraordinary spending in the United States in recent months has seen the dollar stubbornly resist these stories, but according to a recent analysis, that is changing. At the start of the pandemic, global financial institutions and governments rushed to stock up on dollars, increasing demand and value despite new market entrants. But this week, as Congress considers another big stimulus bill, the dollar fell to its lowest level since May 2018.
We are not witnessing a collapse in the monetary system, but certainly a tension that, if it continues, will question whether the Fed really knows what it is doing. At the same time, the head of the country’s main banking regulator is calling blockchain-based challengers to the Fed’s central role in payments.
The world’s top five reserve currencies are now looking to go digital
As China and the United States dominate headlines that focus on potential central bank digital currencies (CDBC), and different banks in the European Union are launching their own tests, the remaining two of the top five currencies in the world They have taken important steps indicating the same interest in digitization.
The Bank of Japan announced that it had appointed its chief economist to a team conducting research on the digital yen. In the meantime, the bank of england turned to Accenture to upgrade technology of the UK payment system, without explicitly referring to a CBDC, but Accenture is deeply involved in the development of CBDCs worldwide, including the digital dollar.
The dollar, the euro, the yen, the pound sterling and, since 2016, the yuan form the base of the Special Drawing Rights of the International Monetary Fund and they constitute the backbone of the world’s reserves. None of the five is transacting with a CBDC yet, but it is clear that all are concerned about being left out. CBDC technology is not yet standard, but at least research into it has become necessary for those coins seeking to maintain their prestige.
The Cryptocurrency Expert Visitor from the American Enterprise InstituteJim Harper talked about digital dollars and new payment systems.
Coin Center, leader in decentralized network lobbying and research, updated its educational resources.
Kelman Law, explains the basic concepts of payment tax both on earnings in cryptocurrencies as well as on capital gains from trading in the United States.