Balaji Srinivasan, the former Coinbase Chief Technology Officer (CTO), has revealed a frightening scenario where crypto keys are hacked by government-sanctioned backdoor attacks. He pointed out a future possibility that bankrupt governments do not have enough Bitcoin to fund their operations. According to Balaji, a desperate government may try to compel tech companies to hunt for private keys on servers and devices.
“…the federal government may try to compel Apple and Google (and other tech companies) to hunt for private keys on the servers, devices, and browsers they control. And to remit any stolen funds to a cash-hungry federal government.“Balaji Srinivasan, May 2023
The former Coinbase CTO is also known for his unlikely prediction of Bitcoin (BTC) reaching one million dollars by June of this year. His thesis is that the rapid decline of the U.S. Dollar would lead to a soaring BTC price. He even made a bet of $1 million dollars to back up his bold claim.
Is Crypto Expropriation Possible?
According to Merriam-Webster, expropriation is the action of the state in taking or modifying the property rights of an individual in the exercise of its sovereignty. Under Balaji’s scenario, the state will forcibly take away crypto assets in an effort to replenish the country’s treasury. This might sound like something that belongs to ancient history, wherein everything is still owned by Kings, but we do have modern-day examples.
- In 1933, President Franklin D. Roosevelt signed Executive Order 6102. The EO prohibited the private ownership of gold, except for certain purposes. All persons were required to deliver their gold coins, gold bullion, and gold certificates to the Federal Reserve Bank or any other Fed-affiliated banks. The order was intended to prevent the hoarding of gold and stabilize the economy during the great depression.
- In 2013, Cyprus imposed additional taxes on bank accounts as a measure to save the country from a debt crisis. The one-time levy aimed to raise 5.8 Billion Euros to recapitalize the struggling banking sector. The additional tax was deemed to be unfair by many depositors and is equivalent to confiscation by taxation.
History tells us that governments are capable of implementing extraordinary measures during times of emergency. This is what Balaji is trying to tell us. It is possible that in the near future, Bitcoin or other Crypto assets will be treated with the same or greater value as precious metals. Governments that are struggling with budget deficits might be forced to confiscate digital assets to plug the gaps.
What Does the Future Hold?
Is Balaji’s prediction possible? Balaji, being a former Chief Technology Officer for a major exchange, is probably smarter and more well-informed than the average guy. He has given a probable scenario, but nobody can see the future.
It is true that governments around the world are swimming in debt and this is a major concern. But we are still missing a piece of the equation. Bitcoin, otherwise known as digital gold, is still not being hoarded by central banks. Balaji’s scenario will be closer to reality once BTC or any crypto assets are formally recognized as stores of value. Let us hope that when the time comes, governments already have solutions to their debts without confiscating private funds. Better yet, let us hope that crypto ownership becomes inviolable rights soon.
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