Do you think the money that you deposit in a bank is really yours? Well, guess what? it isn’t. In most countries, the United States included, the money in your bank account is actually the property of the bank. When you open an account with a bank and deposit your money, you surrender legal title to your money.
Fractional reserve banking isn’t well understood by the public. In essence, the fractional reserve system means that a bank only has to have a fraction of the money they owe their customers. In the USA the FDIC insures most individual deposits up to the amount of USD $250,000. This creates peace of mind but doesn’t change the fact that most people don’t own their money.
Cryptos aren’t like money in your bank account
Over the course of 2017, the amount of gold and silver coins sold in North America plummeted. Silver coin sales were down over 70%, and many small coin dealers suffered as a result of this. It is impossible to know for sure why demand evaporated, but the dearth of demand for precious metals happened at the exact same time that cryptocurrencies exploded in price.
Cryptocurrencies, much like gold or silver, aren’t like money in your bank account. When you own bitcoin, gold, or silver, they are yours.
Depending on the agreement that you have with a storage facility, the gold, silver, or cryptocurrency may or may not remain your legal property. Although in most cases for metals, they are simply held by a custodian, and not the property of the facility that ensures their safety.
Maintaining ownership over cryptocurrencies is even easier than precious metals. Unless you decide to send them to another person, they are yours. There are companies like Xapo that offer safeguarding services for private keys, but at no point do they take the legal title from the crypto’s owner.
Know what you have
The reason why cryptocurrencies probably appeal to the same people that buy gold and silver is simple. There are some out there who understand the shell-game that the banks play with money, and how shaky the entire fiat system may be.
Not only is the money in your bank account not really yours, it is simply the debt of governments that are in terrible shape fiscally. The USA is looking at trillion USD deficits at the federal level for the foreseeable future. Many of the other major governments are in a similar position.
Nations like Japan have a huge amount of debt relative to GDP, and all those Yen are simply the promise to pay for the debt, with even more Yen. The same is true for the Eurozone and any other country that uses fiat currency. Cryptocurrencies offer an asset that a person can both own and use, which is why they may be taking so much flack from the central banking system.
Nicholas Say was born in Ann Arbor, Michigan. He has traveled extensively, lived in Uruguay for many years, and currently resides in the Far East. His writing can be found all over the web, with special emphasis placed on realistic development, and the next generation of human technology.