The West faces a crisis of monetary confidence according to Balaji Srinivasan

Balaji Srinivasan, former CTO of Coinbase and influential investor in the crypto ecosystem, says Western governments will eventually launch massive asset seizure campaigns. And this, as a sovereign debt crisis draws closer. He says he sees a time coming when the State will look for new outlets, because the bill is growing and the option “to continue as before” is closing. And in the same breath, the implicit message is clear: Bitcoin once again becomes an exit option, or at least a plan B, when confidence in the fiat system cracks.

The debt crisis as a backdrop, not just a backdrop

When debt becomes structural, tax policy is transformed. We increase certain taxes, we create “exceptional” taxes, we change the rules of the game in the middle of the game. And when that's not enough, the vocabulary gets tougher.

In this context, Bitcoin is used as a trust thermometer. When savers think that the rules can change quickly, they look for assets that are more difficult to immobilize. Not necessarily to “escape”. Sometimes just to breathe.

International institutions have been monitoring the rise in public debt in major advanced economies for years. On the International Monetary Fund's data tool, US government gross debt is shown at very high levels as a percentage of GDP in recent projections.

At this stage, it is not a question of saying that the seizure is “inevitable” in the legal sense. It is more a question of trajectory. The bigger the debt, the more inventive governments become.

That Srinivasan highlightsit is an expanded notion of seizure. He is not only talking about a State which arrives to “take” a good. Balaji also emphasizes more diffuse forms, such as inflation, which erodes assets without producing a notice of passage. In a long discussion, he even summarizes the logic as follows: seizure can come “by inflation” or “by direct capture”. On the other hand, bitcoin can be held without a bank, provided you take custody of it.

The historical precedent that maximalists brandish: gold, then Bitcoin

When we talk about seizure, the story of gold always comes up on the table. In 1933, Franklin D. Roosevelt signed Executive Order 6102. In fact, the latter restricted the holding of gold and imposed a remittance to the State beyond certain thresholds, in a context of banking crisis. This is where bitcoin enters the narrative as a “hard asset” and as infrastructure.

For Balaji's supporters, bitcoin is not just an investment. It is a tool of individual sovereignty, provided that its conservation is controlled and intermediaries are limited. The nuance is important. In fact, holding bitcoin through a platform is not the same as actually holding it.

Balaji mentions the risk that a very centralized universe makes assets easy to freeze, scan, move against the will of the holder. He cites, for example, dependencies on platforms and software updates, with the fear that a state injunction becomes technically enforceable.

There remains the less comfortable part, the one that we forget when the market is euphoric. Bitcoin does not eliminate political risk, it displaces it. Taxation, reporting obligations, pressure on entry and exit points, all of this already exists to varying degrees. “Exit” is therefore a strategy, not a magic wand. And in an over-indebted world, the rules move quickly, sometimes silently, sometimes with a big speech on television.