As director of the United States Mint from 2006-2011, Ed Moy presided over one of the largest money printing initiatives in the world.
Moy shepherded the Mint through the earliest rounds of the now-infamous quantitative easing program, which was used by US regulators to bail the economy out of the 2008 financial crisis, but was unable to direct monetary policy. Because the Mint takes its direction from the Federal Reserve, Moy's task was just to keep the greenbacks rolling out while the Fed electronically injected hundreds of billions of dollars into the stock market.
The visceral pressure of that experience – when the stakes were so high – has helped to shape the evolution of Moy's views about money in very distinctive ways. After his service as director of the Mint, Moy was one of the first people to buy a Bitcoin IRA, perhaps the ultimate way to hold cryptocurrency.
Although he is a passionate advocate for cryptocurrency, his enthusiasm isn't born out of spite or resentment for fiat. Moy sees the long history of money, trust, and human exchange when he looks at cryptocurrency, and believes that the associated volatility will one day reach a natural economic equilibrium, perhaps even alongside fiat. ETHNews had the opportunity to pick Moy's brain about the Fed, the philosophy of money, and the potential of crypto to change everything.
Fixing the Financial Crisis
ETHNews: You were appointed as the 38th director of the US Mint under President George W. Bush and served from 2006-2011. What are your thoughts about all the money that we printed during that time?
EM: As someone who believes in free markets, I'm not a fan of quantitative easing. But under the circumstances, I understand why we did it. The context was dealing with the worst financial crisis since the great depression. Congress and the president, who are elected by the people, are supposed to drive economic policy, especially fiscal policy. Unfortunately, they were at odds and did not work out their differences. The Fed is run by appointees and its tools to "fix" the economy are much more limited. In the absence of economic and fiscal leadership, the Fed used its monetary policy to get us out of the financial crisis. Quantitative easing is a huge untested experiment that will take years or decades for us to unwind and deal with all its unintended consequences. Saying that, the US dollar is the cleanest shirt in the dirty shirt hamper and still the dominant world reserve currency. I don't see it going away or even losing its top status anytime soon.
The Fed and the Future
ETHNews: The Federal Reserve, perhaps rightfully, hardly ever says anything about cryptocurrency. People really want to know what they think. Do you think they will ever recognize cryptocurrencies?
EM: The challenge for central banks with cryptocurrencies is that while they are attracted to cryptocurrencies, enhanced security features, and public ledgers (imagine being able to really track the velocity of money), expanding the money supply is contrary to the self-limiting nature of cryptocurrencies like bitcoin or the centralized "central" bank using a decentralized ecosystem. In other words, central banks will co-opt certain features of cryptocurrencies but by definition, will never develop a true cryptocurrency themselves.
ETHNews: What does that mean about the evolution of money and cryptocurrency?
EM: I do think that cryptocurrencies will become a (not the) viable means of currency. They will be used more frequently in countries where their currency or payment methods generally don't work well for their citizens and less where currency and payment methods do work well. The future that I predict is one where people and companies will have portfolios of multiple currencies and payment methods and will use the ones that are most convenient for each kind of transaction. In addition to cash, checks, money orders, ETFs, prepaid cards, credit cards, debit cards, etc. … cryptocurrencies will be part of the mix. The trend within that mix is moving away from physical currency toward electronic and digital forms. I believe that physical currency and traditional payment methods like checks will always be with us but they are likely to have a smaller market share over time.
ETHNews: Really? Many believe cryptocurrency threatens the supremacy of fiat because it has so many digital advantages. How can these polar opposites coexist without one destroying the other?
EM: Think about entertainment. Operas were supposed to takeover symphonies, musicals over opera, movies over musicals, TV over movies, cable over TV, and the internet over cable. Yet all remain with us today. Each have found a viable market, though operas are far less popular today than cable-based entertainment. I believe the free market works and cryptocurrency use will grow if the markets determine that they offer greater convenience, lesser cost, and improved security over other payment methods for any particular transaction.
Reflection on the Free Market
ETHNews: But won't eventual governmental regulation prevent the free market from leveling the playing field?
EM: There are two trends in money. The first has to do with competition. The American government has a monopoly on money since 1933 when Americans were no longer able to use gold as money. Almost every nation in the world followed suit. Without being tied to a standard, governments have the flexibility to try to print themselves out of problems. When governments use money to further policy and individual behavior, political priorities can take priority over economic priorities. So to help counteract this, fiat currency can benefit from competition from cryptocurrencies. Cryptocurrency is a private sector alternative to government's monopoly on money.
"The second trend has to do with money as a payment system. Money used to be physical and required a physical transfer to make a transaction. The trend is money being used electronically, transmitted over proprietary financial highways built by banks and governments, and money transmittal agents. Credit and debit card transactions have dramatically increased over the last 25 years, but much of it has been at the expense of checking. The trend to watch is the growing number of transactions using the internet as the main way to transmit money."
ETHNews: If you think cryptocurrency will eventually become legitimately recognized by the government as a viable form of money and perhaps take its rightful place alongside fiat – is there anything that scares you about cryptocurrency? Do you think the other regulators, such as the SEC, do a good job quelling fear, uncertainty, and doubt?
EM: As a free market advocate, I'm comfortable that the buyer needs to beware and that the market will eventually punish the bad players. But most of the ICOs that I've seen would not even come close to passing knowledgeable investors, let alone SEC scrutiny for transparency and disclosure. I believe that there are many ICOs that are either frauds or will never be ongoing concerns. When they go under and investors lose money, you can bet that they'll complain to the SEC and increased government regulation will come soon after that. There are ways to prevent this but regulation of cryptocurrencies is a long and difficult discussion.
A Better World for the Unbanked
ETHNews: What about cryptocurrency excites you? Why do you support it?
EM: What I'm really interested in is how cryptocurrencies and the technologies that power them can make a huge impact on the world's poor and unbanked and disrupt third parties that have diminishing added value to financial transactions. Because cryptocurrencies travel over the internet, anyone that has access to the internet can make transactions. Roughly 2 billion people in the world are unbanked. That means most are destined to remain poor.
"Take a poor and unbanked farmer in a developing nation. They would like crop insurance because of the risk of droughts. They can't buy it because they don't have a credit card or a checking account, and the nearest insurer is in another country or a city far away.
"They don't have a credit card or a checking account because they make so little money, it's not worth it for the bank to want them as a customer. But with cryptocurrencies, if they have a mobile phone, the transaction can take place over the internet.
"The concept of blockchain, public and private keys, and the ability to transact peer-to-peer can single-handedly eliminate corruption. All the middlemen with their hands out could be eliminated, all the money could be accounted for. That would make a better world."
Moy's comments echo that of Ethereum founder Vitalik Buterin, who has recently been advocating for more tangible results from the blockchain ecosystem. Truly, the decentralized cryptocurrency movement has a long way to go, but if it is winning over monetary minds like that of Moy, it clearly isn't just the smoke and mirrors of ones and zeros. Cryptocurrencies for all their growth, are probably just getting started.