Expensive Fuel and Ignoring Blockchain as a Possible Solution
The political instability in France caused by the demonstrations of the so-called “yellow vests” was to some extent unexpected, and interpretations differ about what actually acted as the trigger and the fundamental reasons for what is happening. The formal reason for the discontent of a significant number of the French was the rise in gasoline prices, as a liter of fuel went up by 7% since May 14 last year, when Emmanuel Macron came to the leadership of the country. In fact, that’s not so critical, but in general, there are other points that reinforce the assumption that the possible further rise in the cost of fuel due to the new tax on it was the “last straw,” as a result of which, car drivers took protective “yellow vests” and started demonstrating discontent.
Indeed, the tariff for natural gas increased by 36%, and the price of diesel fuel for the needs of agriculture rose by 12%. And this is in a situation where the introduction of blockchain into the oil industry is already capable of reducing the costs for the production of both gasoline and diesel fuel by 40%. Can we assume that the matter is in the greed of those who supply the main types of fuel raw materials to France? No, the point is that there is a lag in the introduction of blockchain in this area when such global giants as BP and Shell are already doing it. The “yellow vests,” perhaps, did not know about such changes in the cost structure of fuel, which may well exist in France, but they definitely felt that the price increase was not justified.
The Growth of Other Tariffs Is Inefficiency Multiplied by Neglecting Blockchain
The dissatisfaction was also caused by the fact that commissions for various banking services increased by 12%, an incredible luxury that more and more French people cannot afford, as they are already trying or finding out that transfers can be made cheaper with the help of decentralized money solutions. Thus, the increase in taxes that Macron has implemented over the past year and a half (social tax of companies +21%, car registration fee +15%, penalty for offenses related to improper parking of vehicles and other similar offenses +130%) has already become the consequence of the fact that the government was on the sidelines of technological progress. And, apparently, such a decision was made deliberately. From 2014 to 2016, Macron served as the Minister of the Economy, Industry, and the Digital Sector, and was well aware of what blockchains and cryptocurrencies are.
The Government: Blockchain and Cryptocurrencies Are Important, but We Will Steer Clear of Them
At the beginning of the year, it seemed that France was making a noticeable turn toward cryptocurrencies, as Jean Pierre Landau, a financial “heavyweight” who for six years held various key positions in the Bank of France, was appointed a Bitcoin ombudsman. Landau published an impressive report expressing the idea that new financial technologies should not be regulated since this is a breakthrough technology. He also wrote that it is enough to require compliance with already existing laws from crypto businesses, instead of “burdening” them with additional requirements. Particular attention was paid to the issue of cryptocurrency trading. He proposed to greenlight it because it was convenient to levy taxes on it. In July, the tax on income from cryptocurrency business activities was reduced from 45% to 19%, and it seemed that France would continue the trend of positive perception of cryptocurrencies.
Meanwhile, until 2019, the increased capital tax remains at the level of 36.2%, if it is represented by crypto coins, and if it is represented by other investment assets, it is equal to 30%. In addition, even in the report, a government expert stated that cryptocurrencies should not be allowed to integrate into the existing financial system completely.
France Is Testing Blockchain but Is Not Actively Implementing It
The mistrust led to the real rate of introduction of new financial technologies in the summer being practically paralyzed, and only in late fall, the country tried to catch up with the outgoing train. On December 3, it was revealed that 26 companies and five largest banks in France had trialed the Corda blockchain developed by the R3 consortium. The key word here is “trialed.” While a number of credit organizations from Spain, South Korea, Japan, and China have already switched to the distributed ledger technology, France is still stuck in the testing phase. Previously, one of the country’s largest banks, BNP Paribas, along with colleagues from the Japanese Mitsubishi UFJ Financial Group and the Spanish BBVA, took part in a trial issue of a syndicated blockchain-based loan of $150 million. Auchan, the largest network of consumer goods stores in France, partially uses distributed ledger technology to control certain types of product deliveries.
French Authorities Have Chosen Banks, Not Cryptocurrencies, and Got Discontent
And this is just about blockchain, as cryptocurrencies have not seen broad adoption in France. It is very symbolic that on the territory of this country, which has the third-largest economy among the 28 European Union member-states and the sixth in the world, there is only one crypto ATM. This is, however, mostly the “merit” of the French authorities, who did not give freedom to cryptocurrencies and ignored the fact that society had demand for them. It is no coincidence that since July, the French division of an international company from the “Big Four,” PricewaterhouseCoopers France, began to cooperate with a company that gives cryptocurrencies a push, thus complying the wishes of its customers.
The request for cryptocurrency solutions for the accumulated socio-economic problems began to manifest itself during the protests of the “yellow vests.” A photo of one of the participants in the Paris demonstrations with the slogan “Buy Bitcoin” on his back went viral.
The joint statement of the Financial Market Regulatory Authority, the Banking Supervision Authority, and the Bank of France on November 26, nine days after the first demonstrations of the yellow vests, left no doubt about how regulators treat cryptocurrencies, calling them “speculative assets.” Moreover, they stated that “operations such as buying, selling, and investing in such assets are outside the scope of any regulated market.” Against the background of such a consolidated opinion, the French Tobacco Association’s plans to arrange the sale of Bitcoin vouchers through its outlets, the total number of which exceeds 4,000, seem unlikely.
What Can Replace the Euro: Cryptocurrencies or the French Franc?
Crypto analyst Max Keiser is convinced that one of the reasons for the dissatisfaction of the French is fatigue from the pressure of banks that do not want to give up their place to decentralized cryptocurrency solutions. According to his calculations, the French banking system is unstable, and the outflow of 20% of depositors’ funds is able to “bury” it. He believes that this can happen: the French can begin to withdraw funds from deposits, turn them into Bitcoins, which will generate a cryptocurrency rally and increase the level of welfare of the “yellow vests.”
The proposed recipe, no matter how exotic it might seem, can really save France from further riots, which can resume with renewed force after Christmas and New Year. What Emmanuel Macron proposed in his statement on the introduction of a “state of emergency” on December 10 looks even less plausible. The French President said that the deterioration in the lives of citizens had been observed over the past 40 years and proposed to remedy this by adding 8–10 billion euros to the economy. Even such a small amount looks unreal, considering that the budget for 2019 has already been drawn up with an impressive deficit of 3.5% of GDP. There is no money, but one can only hold on to the blockchain and cryptocurrency solutions, which could return the incredible bank commissions to the pockets of ordinary French, many of whom support their relatives living in other countries.
In addition, the fundamental cause of dissatisfaction with the French is the euro. Last year, it became evident that Germany receives the most significant benefit from the single currency among the 19 countries in the Eurozone, as it increases exports to the detriment of the capabilities of other countries (considering absolute values). At the same time, the positive balance of this important economy in the Eurozone exceeded that of China. Initially, Eurozone economies that are weaker than Germany, such as France, need the power of an inflationary monetary unit.
An alternative could be cryptocurrencies. Right now, when they are in a multi-month decline, having lost their value, they can become cheap cash that would contribute to the export of French goods that have been showing a negative trend over the past five years. The fact that one can be in the E.U., but not in the Eurozone, is demonstrated by Sweden, Norway, and Denmark.
Fiat Is Doomed: It Breeds Instability
Tim Draper is sure that at least half of fiat currencies will be replaced in circulation by cryptocurrencies. Modern ordinary money, in his opinion, is an obsolete phenomenon. The fact that fiat loses to cryptocurrencies is voiced not only in the crypto market but also in the world of traditional finance. This is evidenced by the results of a study by the Bank of Canada.
Economic difficulties were not the cause of the crisis in France. Yes, the proportion of collected taxes in the country’s GDP represents an absolute record for the European Union at 48% of GDP. It has a considerable unemployment rate of 9.7% (among young people even higher at 21.5%). France’s gross domestic product (at purchasing power parity) per capita has increased over the past five years by 12%. So, one cannot agree with the opinion of analyst Bobby Lee that the matter is solely in the uncontrolled issuance of the fiat euro. The situation is that the funds that were collected in the form of taxes were de-facto focused on supporting the obsolete financial infrastructure, and also served as financial support for the economic policy that helped the political orientation of the euro—a monetary unit aimed, in the first place, at the development of the German economy.
It is obvious that the population was annoyed by the fact that the French authorities began to defiantly play on the side of the banks, ignoring the fact that the days of such credit organizations were numbered, as most of the colleagues of French bankers in Belgium clearly stated. Fiat as such, in the face of the euro, once again demonstrated what Vitalik Buterin called “social costs.” Mining of decentralized crypto coins, although it requires electricity, is nevertheless better than “saving” and relying on fiat, which then becomes an object of political passion and embodiment of the ambitions of certain parties that come to power.
As a result, from Venezuela to France, we see political instability that can be solved in one way. The authorities must abandon fiat and allow decentralized digital money. In France, we are witnessing the decline of modern democracy, as its tools cannot cancel the need for a transition to new technologies, just as it was impossible to stop the general spread of the Internet in the 90’s.