Crypto's Future Could Look Like Iraq's Past

The Iraqi dinar was ahead of its time. Years before Bitcoin was invented, American day traders were lured by the viral economic narrative that the Iraqi currency was a ticket to retirement riches following Saddam Hussein’s downfall. Economists and regulators warned it was a gamble, but punters still paid high fees to own an illiquid currency that some thought might just become the most valuable in the world. Instead, it was devalued by 20% in 2020.

The dinar is on economists’ minds again as the cryptocurrency market reels from its latest crash — with $2 trillion of value wiped off a market rife with fraud, theft and high-profile corporate collapses including FTX and BlockFi. The parallels aren’t just about laser-eyed speculation, but the dinar’s historical development as a medium of exchange. While optimists such as investor Bill Ackman see crypto making a comeback if the right technological use case comes along, Iraq’s experience suggests that the survival of any form of money depends more on faith in the institutions backing it.