When the coin is new, the question is ancient

The Washington Examiner reports that Senate Republicans, with precious few legislative days before the midterm elections, are hoping to show progress on crypto regulation — a priority that has stalled along with several others. I know nothing of the engineering inside these digital instruments. But I know a great deal about what happens when a community puts its faith in a medium of exchange whose issuer faces no hard discipline of redemption.

In my own era, Pennsylvania issued paper bills of credit backed by land — a real asset, a tangible security. When the colony honored that backing, the currency served trade well and relieved the chronic shortage of coin that strangled commerce. When other colonies issued notes with no credible backing and no fixed date of redemption, the bills depreciated, prices rose, and the man who had lent money in good faith was repaid in something worth a fraction of what he had extended. The theft was quiet, gradual, and perfectly legal.

Crypto, as I understand it by inference rather than recollection, offers a spectrum from instruments with genuine scarcity rules baked into their design to instruments that are little more than a promoter's promise dressed in mathematical clothing. The Washington Examiner does not detail which direction the Senate's proposed legislation would run. That detail is the whole question. A law that requires issuers to hold credible reserves and submit to audit is a law in the tradition of sound money. A law that merely legitimizes the instrument while leaving the issuer undisciplined is a law that will one day require a second law to clean up the wreckage of the first.

I would also note — and here I speak from my own experience as postmaster and as one who understood that the roads carrying letters were as important as the letters themselves — that the infrastructure through which these instruments move carries its own power and its own dangers. Whoever controls the rails of settlement, be they a colonial land office or a modern payment network, holds a kind of public trust. That trust ought to come with public accountability. Whether the Senate's bill addresses that accountability, I cannot say from the headline alone; I mark it as a question, not a conclusion.

For the working person reading this: before you place your savings in any instrument whose issuer you cannot name, whose reserves you cannot inspect, and whose regulator you cannot petition, ask yourself whether you would have lent money on those terms to a stranger at the market. If the answer is no, the novelty of the technology does not change the arithmetic of the risk. Industry fills the purse; only judgment keeps it full.