When the EU was established, few would have thought that the project would provide so much political drama a few decades down the line. Now, this project designed to integrate the nations of Europe – provided they comply with certain criteria – is dealing with disintegration at a national level. Catalonia voted to leave Spain in a contentious referendum and the major EU players – namely France and Germany – are refusing to recognize its independence. Catalonia’s economy runs on the EU’s common currency, the Euro. This has many wondering what would be the effects of Catalonia embracing cryptocurrency to counter EU opposition to its independence.
Catalonia Embracing Cryptocurrency Beyond User Experience
This is a highly hypothetical question that involves mass adoption of digital assets that not everyone knows how to handle. If mass adoption at this scale is possible and that there are no other user experience issues – payment confirmation times, handling various different cryptocurrencies for payment, complex conversion mechanisms for every-day consumers and other such potential problems – it is necessary to understand the most basic economic effects of Catalonia embracing cryptocurrency without creating one of its own.
These effects are well-known, assuming Catalonia or any other economy for that matter, switches to the deflationary cryptocurrencies that now exist. History is full of examples of how economies running on deflationary currencies look like:
- Expectation of currency appreciation triggers a reduction in consumption.
- Deflation sets in and prices plummet.
- The cycle leads to massive layoffs, the economy collapses, and soon enough Catalonia would be asking its EU neighbors for help.
Catalonia Embracing Cryptocurrency: Political Economy
That is a scary scenario that Catalonia could face should it embrace existing deflationary cryptocurrencies such as Bitcoin or Litecoin. Ultimately it would lose its independence to such a move when its economy breaks-down, but the other lingering issue would be the degree of control over its own economy that Catalonia would have to give up to run on decentralized cryptocurrencies. The reluctance of nations to give up control over their own monetary policies is also well documented. Catalonia embracing cryptocurrencies entails absolutely no political control over its economy whatsoever, even less than what it has now under Spanish sovereignty and monetary union with the EU.
Alternatives to Catalonia Embracing Cryptocurrency
Therefore, Catalonia is unlikely to adopt cryptocurrencies to assert its independence, because in doing so, it would trigger deflationary nightmare scenarios and would give up control over its newly independent economy altogether. The alternative would be minting its own cryptocurrency – it would probably be inflationary – and protecting it from inevitable Spanish attacks. Bitcoin and other cryptocurrencies would come in handy at this point in international trade. Just like Iran is considering the use of Bitcoin as a measure to overcome future economic sanctions according to reports, Catalonia could also recur to it as a measure to circumvent Spanish and EU embargos. In a nutshell, that should be how Catalonia embracing cryptocurrency for the sake of its independence would look like.