Bitcoin's Overton window of opportunity is closing

The banks have grokked bitcoin
There was a time, more than a decade ago, when a small group of people were in possession of a Really Big Idea That Could Change the World. Ideas of course are a dime a dozen, and changing the world happens very infrequently, a testament to how hard it is to turn an idea into a Really Big Idea That Changes the World. But these people had that chance. The idea was good, the world was moving in that direction, it was the kind of thing people could use but didn't know it yet, and importantly the incumbents had no interest.

I'm talking about bitcoin.

Digital money is a really big idea. And when the small band of coders working on it started in 2009, they had this window of opportunity to build a global, digital, borderless currency system unlike anything the world had ever seen. There are currency unions such as in Europe, but in general money gets stopped at the border. Dollars can't be spent in London, pounds can't be spent in Beijing, yuan can't be spent in Los Angeles. There is an entire slow, costly, manually intensive infrastructure to allow capital to move across borders. Efficient, but slow, costly, and burdensome. I'm generalizing here because I don't want to bog you down in 10,000 words about logistics and regulations, but directionally this is all correct.

The real promise of bitcoin was that it could automate that entire infrastructure in a system that anybody could use. It wasn't ideal. Bitcoin's code had some conditions and limits built into it that made it less than perfect, but if the people building it had as their real goal to create a new global currency, they really could have done it. Nobody else was even trying. I could write a book explaining why it didn't happen, but today bitcoin has essentially become a game of roulette while the work of actually digitizing the financial markets has moved elsewhere. And that elsewhere is back within the traditional financial system.

Federal Reserve Gov. Lisa Cook delivered a speech in Dakar this morning on the benefits of "tokenization," a fancy name for creating digital tokens that represent actual assets, at a conference hosted by the Central Bank of West African States, our Maria Volkova reported. She doesn't expect tokenization to replace traditional finance but rather to speed it up, make it less costly and more efficient. She sees it supporting multi-currency and multi-asset transactions, and expanding market access for people and businesses.

The world she described is exactly the world people in bitcoin circles talked about more than a decade ago but never built. Over the past decade, while the bitcoiners were busy building casinos, the banks were figuring out the technology and how to apply it. And because of that it will be the banks that build the 21st century financial system.

Another swipe at swipe fees
It looks like the card companies were right to be upset with Illinois. The Land of Lincoln in 2024 passed a law that banned collecting swipe fees on taxes and tips. Whatever the actual amount of money the law would cost companies, there was always a larger concern: that other states would do the same thing.

Well, Colorado just did the same thing, our Ebrima Santos Sanneh reported yesterday. The state legislature passed a bill that would ban banks from charging interchange fees on sales tax, and all that's left is for Gov. Jared Polis to sign it into law. I don't know if the governor will sign it into law. Apparently nobody knows if the governor will sign it into law. Gov. Polis "has kept his intentions close to the vest," the Colorado Sun reported.

But assume he does. Colorado would join Illinois in taking this stand against swipe fees on taxes. And the groups that are supporting this movement don't seem content with just two noncontiguous states. "Other states should take notice," said Doug Kantor, who is on the executive committee of the Merchants Payments Coalition and is general counsel for the National Association of Convenience Stores. 

The Illinois law hasn't gone into effect yet. It is supposed to go into effect on July 1, but banks are trying to block it. I'd imagine they'll mount the same fight in Colorado.