Who owns your money? There is no simple answer

Skepticism and anarchist views are not always good for handling money.

The whole ecosystem of cryptomonies is convulsed by the rise of institutional capital. In the past, the rises have been driven mainly by the retail sector. However, things are different now. We are at the beginning of a new era. Our community is changing. First, the cypherpunks arrived. Then, the anarchists. Then, the libertarians. More recently, the retail speculators, venture capitalists and family offices have arrived. Now the hedge funds are coming. This means that the ideological element is losing strength as the community changes its configuration. Who owns your bitcoins?

It’s no secret that old school bitcoiners have a very strange concept of „ownership“. Many of these ideas come from the radical individualism of anarch-capitalist philosophy that confuses custody with ownership. In other words, the money in the bank is not your money. But the money under your mattress is. Beyond that, it is the extreme distrust of governments and collectives. In other words, only the individual is trustworthy. The „other“ never is.

Money under the mattress is thought to be unredeemable, simply because it is not in the custody of organisations controlled by the authorities. The case of the 2012-1013 financial crisis in Cyprus is often quoted to say that if it happened that time in Cyprus it will surely happen in the US and the rest of Europe.

It is true that in the past many countries have been forced to temporarily freeze bank deposits during a panic to avoid capital flight and thus prevent a financial collapse. However, we must be very careful to take this danger to the extreme, presenting it as a fact that the same will happen at a global level. No, paranoid gentlemen. I am not being clever. While it is a possibility, it is very unlikely. It is also true that the Internet can be shut down.

In the event of these extreme cases, it would be best to have friends and physical objects, because we are talking about an apocalyptic scenario. During the blackouts in Venezuela in 2019, there was no electricity, no telephones, no banks for several days. The only way to make transactions was with cash or credit.

My case was very special, because I lived very close to a hospital and had electricity, telephone and internet. But it wasn’t much use because the banks didn’t work, and I couldn’t communicate with others. My bitcoins in my hardware portfolio were useless. My bitcoins in other portfolios were useless. My money in the bank was useless. In those exceptional cases, the only thing that really works is the food in the pantry, the friendly neighbour, and the physical objects.

We always hear about hacking, people forgetting their private key, and Dark Web bitcoins confiscated by the authorities, but the only thing that seems to matter is that the Cyprus government intervened the bank in 2012. However, I am afraid that everything that is transferable is confiscated. Cash is confiscated. Gold is confiscated. Of course everything is relative. No one is denying that money in the bank is more confiscated than cash or gold. But that will also depend on the jurisdiction of the bank. It is not the same to have funds in a Venezuelan bank as in a Swiss bank.

However, radical individualism forgets that money is a social enterprise. Indeed, the act of accumulating money under the mattress has great limitations. On the one hand, it is not safe. We all know how dangerous it is to depend on memory or secrets. Of course we can hide our secret key and take all the precautions. But what happens in the event of death? Will it happen to our heirs? Well, we could share our secrets with them, but that requires us to step outside our radicalism a little to trust others.

However, despite all the risks and responsibility involved in personal custody, we must also remember that this is an extremely lonely activity like Immediate Edge. This is a scenario that assumes that the individual is the main unit of the economy. And it does not take into account the most complex organisations.

Suppose the truckers‘ union in country X wants to open a pension fund for its members. The board chooses an external administrator to manage the fund. The administrator then designs an investment portfolio to place the truckers‘ money in. In this case, the administrator cannot afford to tell the board that he will keep the money under his mattress and only he will have the access key. That would be unacceptable madness. The smartest thing would be to choose a (highly regulated) third party who would guarantee the deposit with insurance.

This is the normal scheme in the world of hedge funds. Custody here is not synonymous with ownership. This is a network with balances and checks. The government is involved to look after the interests of the consumer. In this case, the truckers. The custodian does not own the money. And the manager does not own the money either. The owner is a collective. Who has the private key? It does not matter. The real owners probably have a properly registered contract that serves as a certificate of ownership of those funds.

But what if you are an anarchist or a libertarian and don’t believe in collectives, courts or governments? In this case, things get complicated. The safest option would be to resort to individual responsibility. In the past, in fact, radicals in this movement have resorted to gold, land and the use of weapons to be „owners“. But that is not the world of institutional capital. The world of institutional capital is much more social and the concept of ownership is more fluid and less inflexible.

Having money under the mattress has always been associated with economic backwardness. Partly because it isolates you from the banking system. That is the problem of the unbanked. Why is this a problem? Well, because you lose, for example, access to services such as credit.

Now, the arrival of institutional capital means a great challenge for people who have radical ideas about the concept of property. So we must prepare ourselves because we will start seeing more headlines like these: „Paypal bitcoins are not your bitcoins“. „Coinbase is a bank“, etc.

Owning your money does not mean you have your private key. This is a concept born from a sector. But it does not necessarily represent the rest of the world. How much money is in the personal custody of Jeff Bezos, Bill Gates or Warren Buffet? Not much. But that doesn’t mean they don’t own anything.

Bitcoin is growing. That means it’s time to grow up. Radicalism is possible in small groups, because it’s much more difficult to be a radical in larger groups. Here’s a thought: The impact of institutional capital will go beyond a price hike. It will also affect the Bitcoin culture.