CHICAGO (CN) — When Illinois Governor J.B. Pritzker announced in late August that CoinFlip, a cryptocurrency exchange service, was expanding its services and moving its headquarters into Chicago's historic Old Post Office, the response was muted. Only a handful of local papers picked up the news; the story otherwise buried amid more pressing concerns about school reopenings, spiking Covid-19 rates and Rahm Emanuel going to Japan.
But the city's collective shrug at the expansion was also a reflection of Chicago's, and to a lesser extent, Illinois' financial culture. That the city has proven highly amenable not just to cryptocurrency exchange — CoinFlip alone manages some 15 bitCoin ATMs here — but is a reflection of its history as an important node in global finance capital systems.
"Illinois has long been a global leader in financial services. And today we are building on that legacy, working to build a cryptocurrency regulatory framework that's best in the nation and expand access to capital for innovative companies," Pritzker said in the press conference announcing CoinFlip's move.
This is most visibly exemplified by the Chicago Mercantile Exchange — a 123-year-old institution that began as the Chicago Butter and Egg Board, trading on agricultural products like corn and wheat. And between trading on corn and crypto, the CME has proven Dutch-like in its willingness to adapt to changing trends in the market. In 1969 it began trading on financial futures on top of whole commodities. In 2010, it purchased a 90% interest in the Dow Jones stock. In 2017, it started trading on Bitcoin futures.
Of course, it still also trades on corn and wheat.
"We handle a couple billion contracts every year," a spokesman for the CME said in an interview, in which he asked his name not be put on record. "It's about a quadrillion [dollars] annually."
Whether at CoinFlip's 2,700 bitcoin ATMs throughout the country, or at the CME, crypto exchange works on the concept of an immutable, decentralized financial ledger called a blockchain — a record of every transaction that has ever taken place with that particular cryptocurrency.
Physical money can be deposited and converted into virtual funds tied to the user's virtual wallet on the blockchain, and in turn a withdrawal converts the user's requested bitcoin total into the equivalent amount of physical cash. Every crypto wallet and every record of a wallet's existence lies somewhere in the labyrinthine code of a cryptocurrency's blockchain.
Though Bitcoin is the most well-known and well-trusted cryptocurrency on the market today, there are many different types of digital currencies: Dogecoin, for example, championed by the likes of multibillionaire Elon Musk, and Etherium — Bitcoin's closeset competitor.
According to experienced crypto traders, the anonymity that this chain provides can act as a democratizing force in finance exchange. Boiling market exchanges between human beings down to ones and zeros takes away the inherent advantage that large corporations often enjoy in more traditional markets.
"Each Bitcoin address is unique in the universe. It can’t be forged, falsified, stolen or counterfeited by any known technology. It is, in effect, bulletproof; we have had the ability to uniquely identify every person on the planet for many years now, but for the first time in history, we have a way to uniquely identify every person on the planet, and guarantee that person is who they say they are... and we can do it anonymously," Josh Zerlan, a member of the bitcoin-trading startup Butterfly Labs, wrote in a 2014 column for Wired. "For the first time in history we have the ability to guarantee that each individual has a voice, and that voice is not impersonated."
In January of this year, traders large and small got a taste of crypto's potential for leveling the financial playing field. After begrudged small-time traders on Reddit shorted stock in the video game retail company GameStop, then managed to increase the value of several cryptocurrencies by up to 800%. Their collective actions caused a brief panic in the market and even prompted responses from the Financial Services Committee.
But is this kind of anonymous trading riskier than more mundane outcry trading on physical commodities? Depends on who you ask.
Those on the left — and many national governments — might say yes, for a number of reasons.
"The cryptocurrency craze displays all the hallmarks of previous bubbles. Erratic movements in price. A proliferation of imitators seeking to jump on the bandwagon.... Above all, the volatile price of bitcoin — driven by speculative activity — means that it cannot act as a reliable unit of account, medium of exchange, store of value, or means of payment," Marxist economist and author Adam Booth wrote in a 2018 article for Socialist Appeal.
The U.S. Committee on Financial Services' take was surprisingly similar, if more tepid.
"Like other speculative investments, cryptocurrencies can result in significant investor losses due to fraud, market volatility, and rapid swings in value," committee members wrote in a 2021 study on the subject.
Additionally, bitcoin mining — the process by which thousands of people generate cryptocurrency ex nihilo on their home computers — takes massive energy use. Almost as much as is consumed annually by the Czech Republic. It takes that amount of energy for miners' home computers to calculate Bitcoin's digital code. It's part of the reason why more tightly-controlled and environmentally concerned markets like China and Malaysia have been cracking down on crypto trading.
However, it's also why Nayib Bukele, president of El Salvador, wants to make his country's vast supply of volcanic thermal energy available for crypto production.
"I'm pretty sure this is going to work, not only for us but for humanity, because it is a leap forward for humanity," Bukele told cryptocurrency reporter Peter McCormack in a podcast interview in June.
The opinion on crypto trading among devoted Chicago capitalists, meanwhile, is much more enthusiastic. To the point where some even see federal regulation of the crypto market approaching obsolescence.
"We are quickly approaching the point — actually, perhaps we are past it — when technology innovation and market development in the cryptospace needs no traditional financial regulation at all," Rumi Morales and Colleen Sullivan, two experienced, Chicago-based cryptocurrency traders and commentators wrote in their July 14 OpenOutCry.pto blog. "The open-sourced, transparent, and flexible nature of decentralized systems suggest that the efficient functioning of markets is being coded into the protocols themselves."
Even later in the year, after independent analysis reported that over $350 million in cryptocurrency had been paid to ransomware attacks, Morales and Sullivan insisted that the democratizing impacts of crypto outweighed its risks and instability.
"If we consider the immense potential value of blockchain and digital currency to increase access to capital, remove financial friction, and democratize economic opportunity for all, we see no merit in blaming cryptocurrency for ransomware," they wrote in their August 22 blog.
An optimistic analysis? Maybe. But it's also the in the tradition of Chicagoan financial culture, for better and for worse, and all Chicago cultures live by a simple motto:
Make no small plans.
Read the Top 8
Sign up for the Top 8, a roundup of the day's top stories delivered directly to your inbox Monday through Friday.