The future of money is full government control and knowledge of what was spent, where it was spent, and what it was spent to purchase. And its going to happen very, very soon.
Here is what the People’s Bank of China says about digital currencies:
“A legal digital currency must solve this problem thoroughly, both by protecting user accounts with cryptography and by establishing a controlled anonymous system to ensure that transactions can be traceable under certain condition”
The only reasons to trace transactions is to find out if the settlement process worked both legally and as intended. The intention behind a settlement process is only important to the parties in the transaction, however, the legality of a transaction is purely a government concern.
Let’s imagine a future where block chain technology is applied to all major asset classes. The entire history of transactions associated with each individual segment of the asset is easy to trace as it is contained on the ledger associated with the individual asset. The ownership history of an asset can then always be traced!
Adding “what was paid for this asset during the transaction to the ledger” will be trivial. Adding the payment method, quantity paid, and even more details will become a standard part of what you purchase when you buy an asset.
This will be proof this transaction was not part of some money laundering or other illegal ‘scheme’, and that you personally acquired it through legitimate means.
Of course, the eMoney paid for these assets will also have a trail. The PBoC is clear this is one of the end goals of their vision of eMoney, and I’d be shocked if the central bankers of the US and the Eurozone thought any differently. Illegal transactions are illegal for a reason, and finding ways to prevent illegal actions before they happen is a primary goal of most law enforcement officials.
You can see where this is going – full transaction history of assets that include what was paid for the asset will become the standard to insure the asset has a clean, clear, and fully legal provenance. Assets that do not have this will become impaired in value relative to assets with an established fully-legal provenance.
Any possible anonymity provided by some sort of eMoney will only be part of the control structure. And soon, people will begin to insist their money also has this provenance. You can imagine a company like Apple, Amazon, or eBay insisting that any eMoney used to purchase from their site has a fully established legal provenance in order to purchase goods on their site. Imagine the SEC insisting stock transactions involving eMoney have eMoney with an established legal provenance.
And we come to the 800 pound gorilla of getting paid, the Internal Revenue Service. Imagine the IRS says “show the eMoney you use to pay us has a clear legal provenance”. This will be easy to do with eMoney – it will be easy to put a “in exchange for CCC” field into the transaction ledger.
We currently do not have a way to establish provenance of money. eMoney will have this capability, and it will be used by governments to control eMoney, largely through insisting any eMoney used to pay the IRS or buy major assets has clear legal provenance.
Problem: Long transaction history. The transaction history of a single unit of money can quickly become long, so how can we solve the provenance and long history problem? One way would be that fully legal deposit institutions like banks or holding account providers could destroy the transaction history, and then issue ‘new and fully legal’ eMoney to their depositors as they use this money out of their account.
Problem: the eMoney is used illegally. The government will issue an update to banks and other deposit institutions that this money cannot be deposited and ‘cleaned’. Major retailers will be not accept this money, because they won’t be able to deposit it. This money will be effectively cancelled.
Hey all of this is terrifying, but it sure seems like this has a reasonable chance of happening, and happening relatively soon! Sleep well.