Do libertarians dream of electric coins? The material embeddedness of Bitcoin

Abstract

The new, decentralized, anonymous digital currency Bitcoin has in less than three years gone from a proof-of-concept to being traded for about €78 million on a daily basis. Its ascendancy offers up a puzzle for financial regulators and other law enforcers worldwide, while also promising to fulfill the political visions of a group of market-anarchist cryptographers. While it is still a very small economy in absolute terms, Bitcoin also poses some interesting challenges to traditional economic institutions, and is thus an interesting case for economic sociology. Using the notion of material embeddedness, this paper examines the possible implications of a further propagation of Bitcoin. If the currency proves a success, this will have ramifications for a large number of economic institutions, such as the possibility of taxation of untraceable money, the credit economy and interest rates, and international currency control.