The Legacy Financial System Isn’t Built for You, But Crypto Might Be (If You Let It Be)

Not long ago, Federal Reserve chairman Powell pledged to plunge the US economy into recession and throw millions out of work to get inflation down.

More recently, he pledged to keep interest rates low enough that people and businesses go further into debt but high enough that they don’t make too much money.

That seems bad, but central bankers do not have to look out for you. Their priority is the government’s money, not yours.

They need to keep money flowing to banks and other entities that hold financial power. Those insiders are vital for the health of modern economies and trade networks. You hope their greed serves the greater good. Often, it does.

But don’t let that fool you. They’re not working for you. They’re working for themselves and their shareholders.

As an American comedian once said, “It’s a big club, and you ain’t in it.”

A dream or a scheme?

In the States, we have this concept of the American Dream.

It means different things to different people, but basically, it’s the idea that anybody can achieve financial security and social mobility through hard work and smart decisions.

Do you know why it’s called the American Dream?

Because you have to be asleep to believe it.

It’s not a dream. It’s an aspiration. It’s an innate desire among a certain group of people to build a better life for themselves. To work hard and keep the fruits of their labor. To own the things that they create.

Isn’t that what brings us to cryptocurrency?

The idea of turning a small investment into something much bigger.

The idea of contributing time, effort, and money to a larger cause — with the benefits of our actions returning to us in the form of wealth or appreciation of our assets.

The idea of securing our creations on an immutable ledger that guarantees our sovereignty.

Not rigged, but . . .

The legacy financial system does not give us any of that.

In the legacy financial system, we need to know somebody who knows somebody. We have to get into the right social and financial networks. We have to give up decades of our lives to make somebody else rich in the hopes that they will pay us enough that we can feel good about our lives and maybe, if we’re lucky, retire.

It’s not that the system is stacked against us. It’s not! Plenty of people get ahead. Opportunity abounds.

The problem is, the system rewards only those who play by its rules.

With cryptocurrency, anybody can create a new game with new rules.

Cryptocurrency fulfills the pent-up demand for different ways of doing business, securing rights, distributing wealth, and raising capital.

It’s a whole new game.

Today, it’s all about making more of your government’s money. We’re caught up in a burst of speculative enthusiasm.

Once that dies down, consider some of the big, transformative innovations that can only come from crypto.

Nonfungible Tokens (NFTs)

When I started in crypto, the big idea was branded tokens.

You create a token and sell it. No rights or utility, just a way to make money from your followers. You can set a certain threshold for various privileges — e.g., if you hold 1,000 Markcoin, you get a free dinner with me.

Now, the market has shown a better way: NFTs.

Not only can you deliver a tangible experience with NFTs in a way that you can’t with branded tokens, but you can also give people something concrete that they own exclusively and can monetize in their own way, with a share of the value returning to you and everybody else who holds that NFT.

You can embed rights and privileges that convey only to token holders, with a mechanism to verify that everybody who holds those rights and privileges does so properly.

For example, performance rights to stage a play, deed or title to a plot of land, membership or access to a certain club, and so on. You sell the rights and derivative benefits to a global audience frictionlessly.

NFT holders do not have to worry about the price of the underlying currency for whatever blockchain they’re using. They only have to worry about the value of their NFT.

Decentralized Finance (DeFi)

With DeFi, protocols replace banks with smart contracts that programmatically issue loans, set interest rates, and manage controls to prevent or discharge bad debt.

The world’s wealth no longer gets locked up and split among gated entities that pick and choose who can lend and borrow.

Instead, vast pools of capital flow across open, permissionless financial networks that everybody can access. You just need to download the right app or pick the right protocol.

With DeFi, a teenager in Indonesia has the same power as a Manhattan financier.

Imagine humanity’s collective wealth at your fingertips — a system where it doesn’t matter what you look like, where you live, who you know, how you talk, or which family you come from. As long as you have something to contribute, you have something to receive.

US politicians and legacy financial entities want to turn DeFi into a profit center for Wall Street. They’ll gladly let legacy financial entities wrap DeFi into a portal or app, then charge you for access.

Let them.

That teenager in Indonesia will create a better, cheaper version that everybody can access from anywhere, any time. A pensioner in Turkey will do the same. A former World Bank analyst in Zug will do it, too.

They’ll instantly have access to a larger capital pool than any Wall Street entity could ever hope for: all of humanity, not just the 10% of humans who pass KYC, clear AML regulations, and have access to the US financial system.

Real-world assets (RWAs)

What about RWAs?

RWAs represent digital records of things you own in the “real world.” For example, commodities, artwork, real estate, stocks, bonds, and anything else you can place a value on. A trusted custodian secures these assets (or claims on these assets) in exchange for tokens you can sell or redeem on demand.

These tokens capture and distribute yields, dividends, and other benefits to token holders.

As a result, businesses and common people can sell financial assets to more buyers in more ways with more transparency and lower fees than they can with legacy financial technology.

Buyers can access these assets from anywhere, at any time, using a crypto wallet.

Some people think RWAs are stupid. Either stick to synthetic assets or don’t even bother with blockchain.

Time will tell.

To be fair, RWAs involve a lot of legal and operational nuance. That’ll take time to figure out.

Traditional financial entities have plenty incentive to do so.

With RWAs, Wall Street gets a new way to make money, issuers get immediate access to a global capital pool, and custodians get another source of income.

Look for the first RWA tokens, “secured by [BNY Mellon or some other white shoe custodian],” coming to your financial institution in 2025.

(Ok, maybe 2029.)

Stablecoins

The beauty of RWAs?

You don’t need dollars to buy US assets. You can use any crypto.

So it’s ironic that the first RWAs were US dollar stablecoins.

Also, fitting. These tokenized dollars can go to anybody, anywhere, anytime, in any amount, without restriction, at almost no cost.

These cryptocurrencies boom everywhere people can’t easily get US dollars.

Compared to a spread from a money exchange or a 3% fee on a credit or debit card, stablecoins offer a cheaper, simpler way for people to move dollars — or any other currency that has a stablecoin counterpart.

Better yet, you don’t have to share sensitive personal information, give money to a broker, or carry cash on your body.

Central bank digital currency

What about central bank digital currency, a form of government money that runs on a blockchain?

Call it the intranet to crypto’s internet. All of the benefits with none of the transformational potential.

CBDCs give governments the illusion of authority and a way to control the flow of capital within an economy.

An innovation, for sure. Not a game changer. Same boss, same system, new delivery platform.

Some think CBDCs will kill stablecoins.

I doubt it. CBDCs may make stablecoins even more valuable.

Stablecoins fill a different need than CBDCs. They have a bona fide use case: people want dollars but either can’t access the US financial system or want to do things the US financial system does not allow.

CBDCs can’t fill that need. As a result, there will always be a place for stablecoins.

Besides, anybody can launch a stablecoin from anywhere and instantly release it globally. How does any government snuff that out?

Tomorrow’s technology, today

Some may say, “Those examples are all hypothetical.”

They’re not hypothetical. They already exist!

But if your point is “they have problems,” you’re right. Not every problem has a solution, but every solution has problems.

Fortunately, crypto leaders are throwing time, money, and talent at those problems.

Let’s hope they succeed.

We need cryptocurrency to succeed. It’s our only chance to get ahead without playing a rigged game.

When the economy isn’t doing well, your central bank pumps it with cheap money to boost the price of assets and make it less expensive to borrow against those same assets.

Who owns the most assets? Rich people.

Who benefits the most? Rich people.

Then, when the economy does well and businesses start making more money, spending more money, and growing the economy, prices and wages go up.

At that point, your central bank raises rates to crush wages, kill job opportunities, and reward people who have cash.

Who has the most cash? Rich people.

Who benefits the most? Rich people.

You’re trying to make a dollar out of 15 cents. Your government is trying to make your dollar into 15 cents.

It’s a big club and you ain’t in it

We have families making $500,000 and feeling poor. Families making $50,000 and feeling poorer.

We all know something’s wrong, but nobody’s talking about it.

The media distracts us with war, hatred, and conflict. A spectacle of atrocities that keep us angry enough to care but not so angry that we fight back.

Meanwhile, we’re starving for financial security. Each day, bread gets more expensive.

The spectacle is always free.

If you’re in this market, you own a share of the financial networks of the future. You’re part of a peaceful revolution. A new game.

Nobody thinks about that now. There’s too much money at stake.

People don’t realize their liberty and security are at stake, too.

Once the attention and enthusiasm die down, you will realize that the life you imagine doesn’t come from flipping memecoins or riding the banana zone to the market cycle peak.

You won’t find it in the latest hot altcoin, any Trump policy, or that perfect data model that predicts Bitcoin’s price will reach $250,000 in 2025.

You pin your hopes and dreams on a financial system whose benefits flow to the rich and powerful.

The value of cryptocurrency is having a financial system where the benefits flow to you.

In honor of the comedian I mentioned at the beginning of this update, a snippet you may enjoy. It’s NSFW with some crude language and lewd imagery.

Mark Helfman publishes the Crypto is Easy newsletter. He is also the author of three books and a top Bitcoin writer on Medium and Hacker Noon. Learn more about him in his bio and connect with him on Tealfeed.