By Adam Tebble

For many in the cryptocurrency community Austrian economist Friedrich Hayek is a pioneer avant la lettre, with his writings on the monetary system from the mid-1970s being regarded as especially prescient.  As the Nobel Laureate argued in The De-nationalisation of Money, the best monetary system would be one that replaced government issued currencies with currencies issued by private banks. This, he claimed, would help avoid the worst excesses of centralised control, particularly with respect to the money supply and the setting of interest rates, because of the distorting effect decisions in these areas have on the economy’s ability to adjust to cyclical change.

Yet, Hayek conceded it was unlikely that his radical proposal would ever be adopted, so much so that by the 1980s he came to regard it as “completely utopian”. The primary obstacle was political, for the very agency that would be called upon to give up its control of the monetary system would also be entrusted with implementing the policy. “I don’t believe we shall ever have good money again before we take it out of the hands of government,” he concluded in an interview given at the University of Freiburg in 1984 ( “We can’t take it violently out of the hands of government. All we can do is by some sly, roundabout way introduce something they can’t stop.”

And it is here where many believe that Hayek was at his most prophetic, for the emergence of cryptocurrency in the last decade appears to be just that “sly, roundabout” and unstoppable denationalised solution that he argued for. The key element here is the “blockchain” technology upon which cryptocurrencies such as Bitcoin ( run.  Intended as a decentralised version of a ledger, or record of accounts, blockchain, or “distributed ledger” technology, is in fact a combination of three different technologies.  A peer-to-peer (or “P2P”) network of computers (or “nodes”) that is open to all and requires no central authority to run it, cryptography to ensure privacy and to protect against malicious actors, and a “consensus algorithm”, or rules(s) governing how new entries are recorded. It is this combination that makes the “chain of blocks”, or entries onto the ledger, permissionless and decentralised (as opposed to the centralised ledgers to be found in banks), but also immutable and tamper-proof.

Thus, because they remove executive control of money from the hands of central authority, blockchain-based cryptocurrencies such as Bitcoin will see to it that Hayek’s vision of a decentralised monetary system, free from government control and conceived almost half a century before its emergence, comes to fruition, and possibly sooner than many expect.

Hayek and the past (and future) or cryptocurrency

Yet, Hayek’s place in the history of cryptocurrency is not that straightforward, for there is an important difference between cryptocurrencies and the idea of denationalisation. Even if governments did denationalise the monetary system, the free market in money that would follow would still leave competing private currencies subject to the centralised control of the banks that issued them. In contrast, because their underlying technology makes centralised control even by private entities impossible, cryptocurrencies take decentralisation a step further than Hayek ever contemplated. Like private currencies cryptocurrencies are denationalised or, as we would say today, desovereigntised. But unlike them cryptocurrencies are decentralised “all the way down”.

And it is not just Hayek’s place in cryptocurrency’s past that is less clear-cut than one may first think. His place in the story of its future will be similarly debateable.

Of course, where the author of Law, Legislation and Liberty does seem prophetic is in his idea of a “sly, roundabout” and unstoppable solution to the problem of government intransigence, for this seems to be exactly what the crypto space, of which cryptocurrencies are but one part, represents. The increasingly large stake that businesses and both institutional and retail investors have in the space’s success is likely to tell politically at some point. Indeed, if one takes market capitalisation as a proxy (some $1tn at the time of writing), the economic clout of those invested in crypto appears set to keep growing until the demand for full acceptance becomes impossible to ignore.

There is also the effect that advances in technology have upon the evolution of the systems, rules and procedures that regulate its use. Denying that such developments will necessitate new regulatory systems and rules in the case of cryptocurrency, and therefore of the monetary system within which it will be nested, may come to be seen as about as far-sighted as denying the impact that twentieth century advances in avionics had upon the rules governing transport systems.

That government will probably have to embrace cryptocurrency can also be seen if we consider the impact of two innovations that have occurred since the invention of Bitcoin in 2008, for it transpires that money is not the only thing that can be decentralised. The first innovation is “smart contracts”. Smart contracts are coded transaction protocols which automatically execute, control, and document the actions and events that must occur for the terms of an agreement, or contract, to be fulfilled. Most significantly, and similarly to Bitcoin transactions, smart contracts are executed on decentralised, peer-to-peer and therefore permissionless blockchain networks. This means that, just as Bitcoin removes the need for an intermediary such as a bank to facilitate and authorise its transfer from one account to another, smart contracts remove the need for third-party intermediaries, or “middlemen”, to act as contractual validators, certifiers, overseers, and authorisers. In this sense smart contracts function like a vending machine, which dispenses its contents only on condition that the right amount of money is put into the slot. By contrast, a trusted intermediary such as a banker or a shopkeeper may validate customers in ways that have nothing to do with their money – “you’re not from here”, “I don’t like your hat”, “you’re a family friend”, etc..

We can understand the second innovation – decentralised applications, or “dApps” – by comparing them to the traditional applications (or “apps”) that appear on smartphones and other devices. Apps are analogous not to the “back-end” internal workings of a vending machine, but to the user-facing “front-end” buttons on the front of the dispenser. It is via apps that consumers digitally communicate preferences, whether it be to tell providers how, when and where they wish to travel (Uber), what goods they want to buy (Amazon), how and with whom they wish to interact socially (Facebook, WhatsApp, Instagram), or what they want to say (Twitter, Gmail), look for (Google), or view (YouTube, Netflix). Importantly, and despite appearing on a ‘phone just as apps do, in the case of dApps the front-end interface is not one that communicates with a centralised server – a “digital shopkeeper” to whom one gives up personal data, and from which one must accept tracking cookies and be subject to other forms of conditionalised transacting. Rather, it communicates user preferences directly to a disintermediated and therefore permissionless, peer-to-peer blockchain network.

Reinventing capitalist relations of consumption

If Bitcoin shows how a decentralised form of money is possible, the decentralised internet or “Web 3.0” of smart contracts and dApps promises to extend application of the principles behind the world’s first cryptocurrency to many other use cases. In effect, wherever there are regular contracts and apps that do not require centralised intermediaries there can be smart contracts and dApps. The social implications of Web 3.0 are potentially huge. For instance, it holds the promise of reinventing what we may call “capitalist relations of consumption”. By offering a decentralised alternative to the ubiquitous apps of tech giants – be they retailers, social media companies, e-mail hosts, map providers, or search engines – Web 3.0 offers an alternative to the enormous power that makes them not just digital shopkeepers, but digital gatekeepers that track and record one’s movements, control the use of and monetise personal data, set limits to speech and expression, and control access to information via algorithmic content filters. Similarly, decentralised finance, or “DeFi”, is making use of the same technology to reinvent customers’ relationships with banks and other financial institutions, for instance with respect to lending and borrowing via new decentralised liquidity protocols such as Aave (, and with asset trading exchanges such as Uniswap (

These innovations show how the crypto space is taking decentralisation “all the way down” in ways that not only go beyond Hayek’s ideas on money, but beyond his example of money. Whilst Amazon, Facebook, Twitter, Google, Uber, banks, and law firms are examples of decentralised provision relative to a world in which these services are provided by the state, they are no more decentralised, relative to their decentralised Web 3.0 alternatives, than Hayek’s denationalised currencies are to cryptocurrencies.

Crucially, however, the way Web 3.0 works offers another reason why governments will likely be required to embrace cryptocurrency, with all the consequences for the monetary system that this implies. This is because, just like Bitcoin, Web 3.0 only functions if there is an incentive to undertake the validation, updating and maintenance work on the blockchain networks where smart contracts and the dApps that run on them are deposited. On the Ethereum network ( where the majority of dApps are hosted, this is achieved via payments to participants in its native currency, Ether. Thus, in the absence of an alternative incentive structure – one that is consistent with the permissionless, secure, peer-to-peer nature of blockchain – the economic and social transformation that Web 3.0 is driving, and which the state will at some point probably be obliged to embrace, will require that it be more permissive of cryptocurrency itself.

To be sure, and contrary to the expectations of its more radical crypto-anarchist enthusiasts, the rise of cryptocurrency and Web 3.0 will probably not issue in an unambiguous Hayekian victory of sly and roundabout market forces over the intransigent state. For even if governments are compelled to loosen their grip on the monetary system, they will nevertheless have a decisive rôle to play.

First, it will be politics’ job to put in place the legal and regulatory framework that is being asked for by the crypto space’s increasingly important political constituency. Of course, this will require policies that encourage rather than thwart the functioning of the space, something that politics cannot always guarantee. But provided this happens, the state will be indispensable to harnessing the many virtues of cryptocurrency and Web 3.0 more generally that are presently driving adoption: enhanced transactional efficiency, privacy, accountability and security, the ability to reduce service delivery costs, potential for innovation in areas such as provenance and supply-chain management, and for the ability to accelerate the financial inclusion of the poor and the unbanked. Equally importantly, a sound regulatory environment, provided by the state as enforcer of last resort, will be required to combat the foreseeable abuses of such a permissionless digital ecosystem, such as dark web commerce, money laundering, tax evasion, fraud, and terrorist financing. The state is going to have a lot of work to do.

Web 3.0 and the politics of markets

Web 3.0 may not end up just impacting the state. It has important implications for philosophical debates about states and markets, and for how the relationship between what is desirable and what is feasible may help us resolve them.

Contrary to their egalitarian liberal and socialist friends, pro-market classical liberals and right-libertarians have perhaps been a little less reluctant to condemn corporate power as vociferously as they could, lest doing so commit them to rejecting market liberty itself. Thus, even if they have accepted that corporations can err, and indeed as the film Erin Brokovich showed, can err egregiously, they also saw no acceptable alternative, if the only one available were concentrating that power in the hands of the state. Indeed, if the problem were power – of which corporate power is just one example – then endorsing the state as the market’s “fixer upper” would not address the problem but make it worse. Cognisant of this, free marketeers have argued instead that even if capitalism is problematic in this respect, the competition that it permits is nevertheless a better way to address the problem. Provided there are no legal barriers to entry there is little to fear from Twitter, Google, and Facebook, at least over the long term.

To egalitarians, of course, the marketeers’ response has always been a philosophical and ethical cop-out. If it is accepted that in permitting inequalities of economic and social power capitalism perpetuates them, then regardless of whether the state is the only alternative, markets should be ruled out on principle. But it transpires that the conceptual contours of the debate have rested far more on what is feasible than philosophers have perhaps been willing to accept. The prospect of post-Hayekian decentralisation “all the way down” opens the way for an alternative means of opposing at least some forms of corporate power that, far from requiring opposition to market liberty, requires its endorsement. In effect, this is an extension of the “leave it to competition” response above that, to the disappointment of egalitarians, concedes the point about power. However, it is an extension with a new twist. Not only must corporations compete with one another and in so doing curb their worst excesses over the long run, Web 3.0 shows how the very notion of centralised corporate governance, the social and economic power that it bestows and, indeed, the very idea of the corporation itself, can also be made subject to market competition.

How much power should corporations have? There’s now a market for that.

Evolution and the curious exception of politics

Of course, regardless of what the state should or should not do, there is always the question of whether, in fact, it would ever want to do it. As Hayek pointed out, we may ask why governments would be willing to assume their regulatory role in the case of cryptocurrency, if the consequence is a ceding of control over a monetary system which they and their central bank proxies have in some cases controlled for centuries? It appears, then, that despite all the excitement and froth, Hayek’s charge of unrealistic utopianism may be proven correct in the case of cryptocurrency.

Whilst its rise may have been sly and roundabout, government will see to it that cryptocurrency will not be unstoppable.

Yet, even if the state does have final say over the shape of the monetary future, that does not vindicate Hayek’s evolutionary pessimism, for his is a view which rests on a curiously incomplete picture of the forces that are likely to determine what the state will do. Indeed, that the author of ‘Notes on the Evolution of Systems of Rules of Conduct’ adopted this stance in the first place is surprising, given his familiarity with, and admiration for, the work of the eighteenth-century philosophers of evolution that came before him such as David Hume and Bernard de Mandeville. Unlike the Austrian economist, both Hume and Mandeville did view money along with law and language as an evolving institution and, therefore, presumably not subject to the kind of political blockage that their successor described in his Freiburg interview.

Far from being thwarted by a Hayekian opposition of interests – between a private sector that sees cryptocurrency as an opportunity, and a recalcitrant state that sees it as a threat – the next step in the evolution of money, and with it the evolution of the monetary system, is likely to be made possible by an alignment of them.

Three factors stand out. First, is the crypto space’s potential as a source of revenue. Particularly in an age of ballooning budget deficits brought on by monetary expansion in response to the Covid crisis, governments are likely to have an interest in encouraging a space that promises enormous added value to the economy and, therefore, new, and increasingly large streams of tax revenue, for instance on corporate earnings and capital gains.

It is not just economic interest that may prove to be too strong a temptation. This also stands to be the case with respect to the state’s interest in doing what it does better. Two areas in particular stand out in this regard. First is its role as overseer and guarantor of the health of democracy and the integrity of elections.  Because validation via smart contracts is not subject to the control of any single entity, the maintenance of electoral rolls, the authentication and counting of votes, and the certification of results can all be conducted in tamper proof ways that have the potential to reduce electoral fraud to zero. Similarly, and precisely because they remove the need for trusted intermediaries within the bureaucracy, public services running on smart contracts and dApps have the potential to ensure that the functioning of government in areas such as procurement, certification, and service delivery is not only cheaper, but transparent, accountable, and non-discriminatory.

The third and final set of considerations are geopolitical. Will Western governments wish to be left behind by rivals such China or Russia, should they decide to change their stance and embrace crypto? Or will they seek geopolitical advantage in loosening, but not relinquishing, monetary control to secure crypto’s many benefits in ways that more authoritarian regimes instinctively resist?  The West, as well as others such as India and Japan, will probably want to make sure that as little influence as possible is ceded over the trajectory of events. Crucially, this is likely to involve not just the judicious regulation of domestic markets as the crypto space reaches further into citizens’ lives. It will also involve the development of a crypto-friendly international monetary and financial architecture to facilitate cooperation in areas such as international finance, cross-border payments and investment, global supply-chain management, law enforcement, and counterterrorism.

Contrary to Hayek’s evolutionary pessimism, and far from it being an obstacle, it is likely that government will be induced by the economics, politics, and geopolitics of cryptocurrency to undergo an evolution in its own thinking.  It will be an evolution born of the necessity of judging whether the long-term interest lies in maintaining full control of the monetary system, or in relinquishing some of that control in return for the promise of growth, new revenue streams, good governance, and geopolitical influence.

The result? By the close of this decade, something even more radical than Hayek’s admirably prophetic vision of denationalisation will likely have become an integral part of the global economic and governance system.

About the Author

Dr Adam Tebble is a Reader in Political Theory. Prior to joining King’s in 2011, Dr Adam Tebble taught at the School of Public Policy, UCL. In the United States he has taught at Brown University, where he was a Post-doctoral Research Fellow (2004-2006), then Lecturer (2006-2007) at the Department of Political Science.

Dr Tebble’s research interests include contemporary political theory, with a specialisation in classical liberalism, social justice, and the politics of culture and identity. He is the author of Epistemic Liberalism: a defence (Routledge, 2016) and F A Hayek (Bloomsbury, 2013). Dr Tebble has published in the journals Social Philosophy and PolicyEconomics and PhilosophyPolitical TheoryThe European Journal of Political TheoryPolitical Studies and the Critical Review of International Social and Political Philosophy.

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