Lengthy earlier than the Blockchain Period, a landmark Scottish lawsuit posed a query that also echoes at present: Can cash carry reminiscence—or should it overlook? In 1748, Hew Crawfurd—a lawyer in Edinburgh—signed and recorded the serial numbers of two £20 notes earlier than mailing them to a service provider in Glasgow. When the letter didn’t arrive, Crawfurd notified the financial institution and publicized the theft. Months later, one notice resurfaced on the Royal Financial institution’s workplace. In Crawfurd v. The Royal Financial institution, the Court docket dominated that if Crawfurd might vindicate the banknote, commerce would stop, for the reason that whole historical past of each notice concerned in a transaction would have to be disclosed.
All through historical past, cash has taken varied kinds—from livestock to cowrie shells to treasured metals. As Carl Menger defined, in barter techniques, sure commodities grew to become media of change as a result of their salability. The standard of cash will depend on sure traits: portability, sturdiness, divisibility, recognizability, shortage, and the often-overlooked fungibility, which has grown in significance within the digital age.
Fungibility—the property making items of a superb interchangeable and indistinguishable—exists on a spectrum. At one finish, distinctive belongings akin to actual property or work are inherently non-fungible. On the different finish, gold and silver exhibit good fungibility, as they’ll at all times be melted, refined, and recast. Fiat currencies fall within the center: fungible beneath the regulation however not objectively, as demonstrated by the ruling in Crawfurd v. The Royal Financial institution.
Cryptocurrencies
In evaluating financial qualities, there’s little question that cryptocurrencies excel by way of portability, sturdiness, divisibility, and recognizability. Satoshi Nakamoto set the usual for shortage with Bitcoin’s decentralized protocol and verifiable provide cap of 21 million BTC. However what about fungibility?
As within the case of Crawfurd v. The Royal Financial institution, an absence of fungibility threatens the usability of a medium of change. The Bitcoin blockchain is permissionless, but additionally clear. The bottom unit of Bitcoin—often known as Satoshis or Sats—equals one-hundred-millionth of a BTC. Following protocol upgrades (Segregated Witness and Taproot), Sats grew to become identifiable. Utilizing the Ordinals protocol, photographs and movies could be inscribed onto particular person Sats, forming non-fungible tokens (NFTs). Equally, uncommon Sats—akin to these used within the transaction that birthed Bitcoin Pizza Day—command a premium amongst collectors.
Whereas NFTs might improve worth, tainted cash are devalued as a result of compromised liquidity. Relying on the identification of earlier house owners or the specifics of previous transactions, acceptability could also be impacted, thereby muddling financial calculations.
In 2018, the Workplace of Overseas Property Management (OFAC) started including BTC addresses to its Specifically Designated Nationals and Blocked Individuals Checklist (SDN Checklist). Throughout covid protests, the Royal Canadian Mounted Police ordered exchanges to dam transactions related to the Freedom Convoy. Elsewhere within the crypto world, Ethereum (ETH) block builders and centralized entities like Tether (USDT) have respectively excluded transactions and frozen wallets in compliance with the SDN Checklist. Coinbase and different exchanges explicitly refuse crypto-assets from sanctioned addresses. Because of this, 1 BTC ≠ 1 BTC, 1 ETH ≠ 1 ETH, and 1 USDT ≠ 1 USDT.
When cash are traceable, fungibility breaks down. As AI advances, mapping transaction networks turns into extra exact—and extra harmful. Figuring out criminality stays on the discretion of particular person governments. A tainted coin might have funded a heinous act—or just belong to a dissident opposing prevailing narratives.
Think about the next state of affairs: Gil’s down on his luck and holds a yard sale. Bitcoin advocates from round city purchase up his belongings. Unbeknownst to Gil, the stranger who purchased his hotplate paid with tainted cash. The subsequent day, Gil sends the proceeds to an change, solely to have his account frozen and the authorities alerted. At finest, Gil is left penniless; at worst, he turns into entangled in a authorized nightmare for crimes he didn’t commit.
Within the absence of privateness, can digital cash retain its fungibility? Theoretically, sure—however anticipating a society to deal with all financial items as equal, even when transaction histories are clear, is unrealistic. As soon as cash turns into traceable, its historical past turns into related. The place surveillance is feasible, censorship inevitably follows. Thus, privateness acts as a protect that ensures financial items stay indistinguishable and are handled equally.
In a earlier article, I explored privacy-preserving providers by the lens of demonstrated choice and subjective worth idea. Individuals typically declare to worth privateness. A public session of a digital euro—carried out by the European Central Financial institution—discovered that 43 p.c of respondents recognized privateness as their most desired characteristic. But, in observe, privateness preservation in financial contexts stays restricted. As nations push towards cashless societies, sustaining anonymity turns into more and more troublesome.
Nevertheless, on the fringes of society, the place publicity can imply theft, arrest, or worse, privateness is a matter of survival. From this, we will deduce that black markets are populated by those that subjectively rank privateness preservation above all else. Unsurprisingly, darkish market customers reveal their choice for personal digital money.
Darkish Markets
Because the Silk Highway launched in February 2011, the most important peer-to-peer marketplaces utilizing cryptocurrencies have operated on the darkish net. In contrast to conventional web sites, accessing these markets requires specialised browsers designed for anonymity. For these engaged in unlawful actions, privateness is important—however in fact, anybody who takes the effort and time to entry the darkish net prioritizes anonymity.
In its 2025 Crypto Crime Report, Chainalysis estimated darknet market transactions at $2.3 billion in 2022 and $2 billion in 2023, partly attributing this decline to a migration from BTC to Monero (XMR). Although talked about all through, Monero is excluded from their evaluation as a result of its personal nature.
Transaction figures for darknet markets are notoriously troublesome to measure. Dread—a darknet Reddit-like discussion board—designates six drug marketplaces on its “superlist.” Three settle for each BTC and XMR; the others—led by Archtyp, with virtually 420,000 customers as of April 2024—settle for solely XMR. A separate examination of the transaction logs of Incognito Market—previously one of many largest narcotics marketplaces—reveals that XMR transactions (265,375) exceeded BTC transactions (244,483), with a noticeable shift towards XMR on the tail finish of its four-year run.
Retailer of Worth or Medium of Change?
Early ties to the Silk Highway led to Bitcoin’s demonization, with politicians branding it a instrument for criminals. Over time, blockchain surveillance firms emerged, and governments handed anti-money laundering (AML) and know your buyer (KYC) laws. Bitcoin is now not perceived as a risk—BTC is traded publicly by exchange-traded funds (ETFs) and fills company and authorities reserves worldwide. After 16 years, Bitcoin has solidified itself as “digital gold,” with its shortage serving as a hedge towards unchecked central financial institution cash printing.
Whereas Bitcoin’s liquidity is unmatched, its effectiveness as a medium of change is hampered by its clear ledger. On any given day, Bitcoin processes 10 to 25 instances extra transactions than Monero, and as of June 14, 2025, Bitcoin’s $2.09 trillion market cap dwarfs Monero’s $5.75 billion. Bitcoin’s community results are formidable, and future protocol upgrades might improve fungibility. Nevertheless, as of now, Monero has assumed the function that Bitcoin as soon as hinted at in its earliest days: personal, peer-to-peer digital money. Forked from Bytecoin in 2014 and based mostly on the CryptoNote codebase, Monero was constructed on a basis of privateness. Its protocol combines stealth addresses to hide recipients, RingCT to cover quantities, and Ring Signatures to obfuscate senders. Because of this, 1 XMR = 1 XMR.
Because the main privateness coin, Monero continues to problem the state’s management over cash. Predictably, efforts to curtail XMR adoption have been ongoing. Underneath mounting authorities strain, XMR has been delisted from most main exchanges and faces a European Union-wide ban beginning in 2027. In the meantime, the IRS has paid two $625,000 bounties in an effort to interrupt Monero’s privateness, to this point with out success.
Regardless of assaults from the state, Monero has confirmed resilient. Decentralized peer-to-peer buying and selling platforms are gaining adoption, and atomic swaps permit customers to change XMR for different cryptocurrencies throughout blockchains with out centralized intermediaries. With privateness baked in by default, Monero is intrinsically fungible and actually censorship-resistant.
Conclusion
The state has weaponized cash and can accomplish that once more. Dissidents have been debanked. Activists and odd residents alike have had funds frozen or seized. The censorship of crypto addresses—coupled with superior surveillance—exhibits that monetary tyranny shouldn’t be a future risk however a gift actuality. A Central Financial institution Digital Foreign money (CBDC) would solely speed up this development, granting governments real-time energy to ban transactions that defy the dictates of the regime.
As Ludwig von Mises wrote:
It’s inconceivable to know the that means of the thought of sound cash if one doesn’t notice that it was devised as an instrument for the safety of civil liberties towards despotic inroads on the a part of governments.
Clear blockchains, by their very nature, are incompatible with sound cash. Fungibility is fragile and can’t survive with out privateness. Digital belongings that aren’t personal by default grow to be instruments of management, placing our freedoms in danger. In a world the place traceable digital funds have gotten the norm, personal digital money stands as a significant bulwark towards the state.
