Opinion

Global cryptocurrency crackdown looms as governments enter digital currency race

Cryptocurrencies, which threaten state control over currency circulation, have gained traction only because governments were slow to act

With China pushing the US and Europe into action, a digital currency battle is shaping up, and cryptocurrencies will be the losers

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Industrial cooling fans operate to thermally regulate illuminated mining rigs at the CryptoUniverse cryptocurrency mining farm in Nadvoitsy, Russia, on March 18. The rise of bitcoin and other cryptocurrencies has prompted the greatest push yet among central banks to develop their own digital currencies. Photo: Bloomberg

Anson Au, PhD, is an assistant professor of sociology, in the Department of Applied Social Sciences, at The Hong Kong Polytechnic University.

Published: 12:30am, 21 Jun 2021Updated: 12:30am, 21 Jun 2021

Financial analysts, writers and retail investors alike have flocked to bitcoin and other cryptocurrencies, like many did with US housing in 2008 and Dutch tulips in the 1600s.

But few pundits have noticed the similarities between cryptocurrencies and gold, and even those who do, treat the parallel as merely a compass for setting a price target. But this parallel is ominously important. It shows that cryptocurrencies threaten state control over currency circulation, and are headed for a heavy regulatory stomp by major governments worldwide, just as was the case with gold in the past.

First, like cryptocurrencies today, gold was touted as a powerful investment alternative to the dollar in the early 1900s. Both assets are believed to have intrinsic value because of their limited supply. There can only ever be 21 million bitcoin and no more, for example, and there are supply limits on many cryptocurrencies as well, mirroring the limited amount of gold in circulation.