“Influential billionaires are working to replace central bank-controlled monetary systems with crypto. This is less far-fetched than it sounds. However, experts believe this revolution is ultimately likely to fail.
Since Bitcoin first captured the attention of the broader public approximately twelve years ago, the crypto sector has experienced exorbitant growth. Until the beginning of this year, it appeared destined to remain a niche phenomenon. Indeed, it seemed more likely that the underlying blockchain technology would serve to revolutionize conventional monetary systems.
With the advent of Donald Trump’s administration, this dynamic has shifted. It is no longer merely microstates—such as El Salvador or the Central African Republic—that are promoting the establishment of crypto; rather, it is the government of the world’s largest economy—driven by self-serving motives, specifically the accumulation of wealth and power (cf. *F.A.Z.*, January 13).
In a recent paper titled "The Political Economy of Shitcoins," political scientists Mark Copelovitch of the University of Wisconsin and Thomas Pepinsky of Cornell University examined potential scenarios regarding how the monetary system might evolve under current conditions.
They consider it most probable that crypto will establish itself as a complement to the traditional financial system. In this scenario, crypto would remain a distinct, private asset class. However, Copelovitch and Pepinsky also foresee a number of potential negative developments arising from this. For instance, if crypto holders were to successfully push for demands such as state-backed crypto reserves and favorable regulatory frameworks, the asset class could ultimately become dependent on bailouts and safety nets—thereby becoming "too big to fail."
In such a scenario, the very same patterns of dependency that currently exist between governments, central banks, and traditional financial institutions would emerge. They cite Trump’s "Genius Act" as a prime example; this legislation mandates that stablecoin issuers fully collateralize their coins—primarily using liquid assets or short-term U.S. Treasuries, government bonds. This, they argue, could become the root cause of systemic banking crises.
With state-held crypto reserves—such as those the Trump administration is also pursuing—privately held assets would effectively be underwritten by the public. Moreover, such a policy would only serve to impoverish nations further; after all, holding a commodity devoid of intrinsic value is inherently unproductive as long as high-yielding investments denominated in real currency remain available. Conversely, if crypto is merely another asset class like any other, this hardly justifies large-scale state support.
Political scientists Copelovitch and Pepinsky, however, remain skeptical that this particular future will endure. They point to the existence of "powerful and extremely wealthy individuals"—figures with close ties to the current US administration and significant sway over the global financial system—who passionately desire a new world in which "sovereign networks" have supplanted nation-states.
For crypto advocates such as American investors Balaji Srinivasan and Peter Thiel, this ambition stems from the conviction that nation-states are incapable of solving the fundamental problems facing modern society and must therefore be replaced by crypto-based political entities—entities which, in their view, would offer superior access to financial and public services, as well as enhanced protection of property rights. Their vision entails acquiring territory through crowdfunding and securing diplomatic recognition from existing states, with the ultimate goal of eventually displacing those very states.
The authors readily acknowledge that this may sound far-fetched or improbable. Yet, they note that the aforementioned actors do not view crypto merely as a lucrative investment opportunity; rather, for them, it represents a means of shedding the state—along with its governments and central banks—which they perceive as a burdensome liability. Consequently, existing national currencies must also vanish, given that they are ultimately predicated upon a (quasi-)state monopoly.
One should also guard against the temptation to regard the status quo as immutable simply because it is the only system one has ever known. Proponents of central-bank-free "free banking" systems—in movements advocating for a system in which money is issued exclusively by private banks have gained traction since the advent of cryptocurrencies (cf. *F.A.Z.*, September 11, 2025). The example of the United States—a nation where ideologies regarding monetary policy and banking have clashed in the past—demonstrates precisely how central banks can, quite abruptly and without warning, be abolished.
In the early 19th century, Andrew Jackson—a president with populist leanings similar to those of Donald Trump—used his veto power to block the renewal of the limited charter of the "Second Bank of the United States," the predecessor to the Federal Reserve (established in 1913). The Bank had been so confident that Congress would grant the extension that it had even applied for it ahead of schedule. While this did indeed harm Jackson politically, he was re-elected nonetheless.
Moreover, the collateralization requirements for stablecoins echo the era of "free banking" in the 19th-century United States—a period that followed the time of the "Second Bank." The State of New York, for instance, imposed just such a requirement on its banks at the time.
However, the Trump administration's crypto-friendly legislation is also driven by personal profit. The Trump family is reported to have earned up to one billion dollars so far through the memecoin $TRUMP and the stablecoin USD1.
The use of the latter is even being supported in government projects. This intertwining of personal profit and monetary reform is, likewise, nothing new. For instance, during the 19th century, silver mine owners—for obvious reasons—voted in favor of replacing the gold standard with a bimetallic system during the debates of the time.
Christopher Olk of the Freigeist Research Group at the FU Berlin and Louis Miebs, a payments specialist at the Association of German Banks, recently wrote that perhaps no other form of "shadow money" has received such enthusiastic support from powerful state authorities as crypto has from the Trump administration. At its core, they argue, it is the "aura of crypto"—directed against both banks and the state—that is driving its integration into the bank-based, state-backed monetary system. Democratic societies, they suggest, should engage in a very serious debate regarding the desirability of this development.
Should crypto indeed displace the traditional monetary system, its wealthy advocates and the developers of new protocols would benefit disproportionately, Copelovitch and Pepinsky further note. Ultimately, in order to ward off the threat that crypto poses to the state, sovereign governments might find themselves compelled to fully adopt blockchain technology and digital currencies, thereby bringing them under state control. However, the authors do not consider a system in which Bitcoin—or another coin—becomes a state-backed currency to be stable. Ultimately, the result would be a monetary system similar to the one we have today. For a currency like Bitcoin would merely be a replica of the gold standard—complete with all its inherent weaknesses. In a global economy characterized by high capital mobility, financial crises are inevitable. Stable exchange rates, an independent monetary policy (even if algorithmically driven), and free capital mobility simply cannot be achieved simultaneously—economically speaking, this constitutes the so-called Mundell-Fleming Trilemma. Consequently, calls for macroeconomic intervention would arise—and the system would eventually evolve into a variation of the current one.” [1]
1. Revolutioniert Bitcoin das System? Frankfurter Allgemeine Zeitung; Frankfurt. 31 Jan 2026: 28. Von Martin Hock, Frankfurt
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