Since a mysterious figure named Satoshi Nakamoto first created bitcoin after the 2008 financial crash, cryptocurrencies have multiplied. There are now thousands of coins in circulation, with names that sound like jettisoned intergalactic missions: Libra, Ethereum, Stellar, Auroracoin. Though they differ in branding, almost all cryptocurrencies share a common fantasy: to remove the money supply from the hands of politicians and sidestep the financial institutions that govern the movement of cash across the Earth. But it’s recently become obvious that cryptocurrencies can escape neither of these things. Indeed, the libertarian dream shared by their early proponents appears to be dying at the very moment cryptocurrencies have broken through to the mainstream. “Stablecoins” are pegged to the value of national currencies, while the US Federal Reserve is developing its own digital currency. Elsewhere the Bank for International Settlements recently lent its support to central bank digital currencies for the first time. These developments turn the original purpose of stateless money on its head. Even El Salvador’s recognition of bitcoin as legal tender is being criticised by true believers for forcing consumers to accept the cryptocurrency, thus undermining the very principle of choice. Despite crypto’s futuristic branding, its intellectual origin story is more mundane. The idea of a stateless money supply first arose in debates over a common European currency. While the 1992 Maastricht treaty paved the way for the introduction of the euro in 1999, this wasn’t the only currency model on the table at the time. A lesser-known idea, proposed by the German economist Herbert Giersch in 1975, imagined a parallel currency called the europa that would circulate alongside and compete with national currencies rather than replacing them. Along with fellow economist members of the neoliberal Mont Pelerin Society, Giersch thought what he called “currency competition” in the title of a 1978 book would gradually draw people away from their lira, francs and drachmas. Giersch’s student Roland Vaubel, who would help found the Alternative für Deutschland (AfD) party nearly four decades later, was drafted by the European Commission to explore the idea. Meanwhile, in 1976, Friedrich Hayek, who was in regular contact with Giersch and Vaubel, published two pamphlets with the rightwing Institute of Economic Affairs. Hayek’s essays – one on “choice in currency”, the other on “the denationalisation of money” – became touchstones for those who wanted to bring stateless money into existence. But once it was clear that the euro had beaten out the europa, libertarians began to look elsewhere for places to experiment. By the second half of the 1990s, the internet seemed to offer a space that lay beyond national sovereignty and earthly territory. In 1996, the internet activist John Perry Barlow proclaimed that “legal concepts of property, expression, identity, movement, and context” do not apply online. Some libertarians went further than Barlow and pragmatically observed that the old laws of property might be more secure than ever in cyberspace, where users could escape the reach of national governments and taxes. In 1998, the runner-up for the Mont Pelerin Society’s Hayek prize forecast that the internet would “undermine the monopoly supply of money by governments and allow people to choose between different private money suppliers”. This vision of money without states was captured in a 1997 libertarian manifesto written by the investment adviser James Dale Davidson and former Times editor William Rees-Mogg (father of the Conservative MP Jacob Rees-Mogg). Disguised as an airport paperback, The Sovereign Individual: How to survive and thrive during the collapse of the welfare state predicted that the internet would “denationalise” money. People could forgo reliance on the legal tender approved by governments and instead use immaterial “cybercash”, which the authors imagined as “encrypted sequences of multihundred-digit prime numbers”. Cybercash, they argued, “will bring Hayek’s logic vividly to life”. Their book proved popular with a little-known venture capitalist in San Francisco’s Bay Area. The young Peter Thiel was enthused by Davidson and Rees-Mogg’s vision for a nationless digital currency, and in 1999 he launched PayPal, bringing their prophecy closer to reality. Thiel’s company was just the beginning of what would later become a proliferation of different digital currencies. But in recent months, a less starry-eyed future for crypto has come into focus. The first flaw in the bitcoin model used by the majority of cryptocurrencies is, ironically, a consequence of its own success. Solving the equations to acquire new bitcoins (referred to as “mining”) requires large volumes of computer hardware that frequently overheats and is extremely energy intensive. Estimates put the annual energy usage of bitcoin mining between that of Sweden and Malaysia. And as these “mines” multiply, their operations begin to stretch and even overwhelm national power grids. Iran banned bitcoin mining last month after it led to blackouts and possibly the shutdown of a nuclear reactor. Multiple provinces in China, one of the world’s biggest producers of bitcoin, banned mining too, leading to reports of miners relocating their hardware to sites of more traditional underground extraction in Canada, South Dakota and Texas. Chinese crackdowns are extending to holdings in crypto too, sending the value of bitcoin tumbling. South Korea recently seized tens of millions of dollars of crypto assets from its wealthy citizens in a clampdown on tax avoidance – precisely what the techno-libertarians hoped “digital cash” would make impossible. And earlier this month, the US Justice Department announced it had managed to track down and recover most of the ransom paid in bitcoin to hackers of the Colonial Pipeline. The traceless currency leaves a trail after all. Chained to the Earth by cables and wire, crypto is more likely to live on as an extension of the nation state than as a means of escaping it. Like goldbugs before them, crypto fans may have to acclimatise to their hobby horse being, at best, a volatile new asset class for high-risk hedging rather than a truly alternative global currency (though even on this, opinions differ). Most travellers to the crypto craze since its initial spike in late 2017 seem to be drawn not by the possibility of bringing Hayek’s vision to life, but by a willingness to take risks for speculative payoffs. Indeed, the future for crypto now looks less like a techno-utopian dream or libertarian fantasy, and more like subordination to the very thing it was designed to overthrow: the nation state’s monopoly over the money supply. Quinn Slobodian is an associate professor of history at Wellesley College