The Blockchain is a technology that, in the monetary field, allows you to create digital money on the Internet, guaranteeing the impossibility of copying / pasting a monetary unit, unlike classic duplicable files, all in a safe and tamper-proof framework. Therefore, Blockchain is a technology that allows you to easily create money on the web and could have a consequent impact as the Gutenberg printer made it easier to print books and related ideas in the 15th century.
The cryptocurrencies Bitcoin, Ethereum, Cardano, Solana and others, have allowed the development of the underlying Blockchain technologies, with an approach to the valuation of proto-monetary assets through the technological, speculative and marketing trust that ecosystems call “cryptocurrencies have been able to create around these new financial assets.
The coupling of these Blockchain technologies, and the central power to mint money in the form of “fiat” currencies (Euro, Dollar, Pound, Yuan, Yen for example), sometimes qualified as “imperial power”, could allow us to put in perspective the ability of structures such as states, regions, cities and cities in general to finance themselves, particularly in their relationship with the traditional financing instrument which is the tax.
Thus, the taxes paid to sovereign authorities in a city, a region, a nation, an empire, to finance collective or individual efforts, a very old practice, could be called into question by the use of Blockchain technologies.
Is the tax adjusted to finance sovereign power?
The principle of tax is simple, to appropriate as sovereign power a part of the value of an operation, whether it is the payment of a service or a good (VAT), the payment of a salary (income tax and ), or remuneration of third parties on remuneration, assets or capital (real estate, shares, companies, real estate of all kinds).
It goes without saying that finding a way to monetarily finance the actions of sovereign power, be it a war as historically, or social and collective actions as in the modern world, is essential for the proper functioning of the city.
Taxes are traditionally the vehicle for financing sovereign power, along with debt, which can be seen as an upfront payment of future taxes.
However, is the tax still the modern technical instrument suitable for the action of sovereign power?
A form of consensus appears in “very well informed” corporate finance circles to say, or not, that today in 2021, briefly, 10% of the global money supply is in the economic sector in the strict sense, 20% of the money supply in the banking sector, which can be described as “retail finance”, and 70% of the money supply is part of the financial sector companies, described by some as ” Hidden banking business or “Shadow Bank” literally, intimately linked to said tax havens.
A very large part of the globalized currency, guaranteed by the network of central banks, therefore does not follow the rules of taxation, an instrument that lay citizens, modest, as well as rich a priori, must wear without saying a word. .
A legitimate question can therefore be asked according to the prism of fundamental philosophies: must the concept of tax be maintained and how to do it differently from then on?
The answer could, for sovereign power, as well as for citizens, lie in the so-called imperial power of monetary creation. Tax is a way to capture part of the existing money supply, to spread it or distribute it differently than sovereign action.
Transfer the imperial power of monetary creation directly to cities, regions, states (truly independent from the mirror of central banks and the financial system), even to citizens, could allow to finance collective sovereign actions as singular without the technical necessity of the tax, which would thus become null and void. Indeed, the financing of so-called “public” actions would thus be accomplished through fair monetary creation, rather than fiscal payments which are inherently viscous for economic development. Such a hypothesis of transfer of the power of money creation raises the question of good management related to the creation of money, which presents many risks, and Blockchain technology can be used as a tool to control these risks in the service of the common good.
Voting tax on the blockchain
Furthermore, a question often arises: how to guarantee the correct management of monetary creation, in the use that would be made of it in the city, when the political leaders, like the States, are not always excellent managers.
On this point, it is clear that the Blockchain as a ledger of economic and financial transactions, secure and tamper-proof, of which some data may be public as other private ones, is a notable tool for verifying the correct management of common money in an institutional, even democratic, or even civic way. Furthermore, through the so-called smart contract technologies, or smart contacts One could even condition the use of the “common currency” with institutional, citizen and democratic votes. A real control of the imperial power of monetary creation by democracy and the “common good”.
Another question that is regularly asked is that of the inflation risk related to “common” monetary creation. Yes, in fact, printing too much money, compared to the real wealth created, automatically implies an increase in prices, sometimes with notorious economic and political crises. On this point, the Blockchain allows a real-time measurement of economic activity, it is therefore to manage one’s own currency, and the analysis of risks, with a formidable precision that allows to avoid technically, in particular through fair or citizen institutional management. , any phenomenon of uncontrolled inflation. In addition, within a programmable economy that uses Blockchain technology, as Charlemagne or General de Gaulle did through decrees, prices can be technically fixed, to guarantee a constrained price equilibrium, and therefore a balance of supply and demand according to rules other than the freedom of money, to favor the freedom of the common.
Finally, Blockchain technology also allows for targeted monetary destruction, which at the end of an economic value chain, as in the repayment of a bank loan, would destroy the money supply and balance the fair value between the money supply and the volume of economic wealth. . Giving a power of monetary creation can be dualized by Blockchain technology, by a power of monetary destruction, in a balanced institutional framework.
The coupling of the Blockchain technologies of cryptocurrencies and the imperial power of creation of institutional money thus opens an interesting path. in terms of the economic inefficiency of the traditional tax practice.
What the use of an instrument such as Bitcoin, a form of digital gold, legal tender in El Salvador for example, does not allow to do, due to the impossibility of having a tailor-made approach in the creation, distribution and eventual destruction of money.
Therefore, Blockchain technology can technically make taxation unnecessary by sovereign powers, prefer to take back imperial money-making power from central bank networks, and gradually make tax havens a storybook d. . What is technically possible can be more difficult to achieve politically. But this maxim of Napoleon goes beyond time and space: “ impossible is not French “.
Yann Le Floch, digital currency banker, former investment banker for BNP Paribas CIB, engineer of the Mines de Paris, certified in Blockchain by MIT and Harvard Business School in sustainable development.