Long before the Blockchain Era, a landmark Scottish lawsuit posed a question that still echoes today: Can money carry memory—or must it forget? In 1748, Hew Crawfurd—a lawyer in Edinburgh—signed and recorded the serial numbers of two £20 notes before mailing them to a merchant in Glasgow. When the letter failed to arrive, Crawfurd notified the bank and publicized the theft. Months later, one note resurfaced at the Royal Bank’s office. In Crawfurd v. The Royal Bank, the Court ruled that if Crawfurd could vindicate the banknote, commerce would cease, since the entire history of every note involved in a transaction would need to be disclosed.

Throughout history, money has taken various forms—from livestock to cowrie shells to precious metals. As Carl Menger explained, in barter systems, certain commodities became media of exchange due to their salability. The quality of money depends on certain characteristics: portability, durability, divisibility, recognizability, scarcity, and the often-overlooked fungibility, which has grown in importance in the digital age.

Fungibility—the property making units of a good interchangeable and indistinguishable—exists on a spectrum. At one end, unique assets such as real estate or paintings are inherently non-fungible. At the other end, gold and silver exhibit perfect fungibility, as they can always be melted, refined, and recast. Fiat currencies fall in the middle: fungible under the law but not objectively, as demonstrated by the ruling in Crawfurd v. The Royal Bank. …

When coins are traceable, fungibility breaks down. As AI advances, mapping transaction networks becomes more precise—and more dangerous. Determining criminality remains at the discretion of individual governments. A tainted coin may have funded a heinous act—or simply belong to a dissident opposing prevailing narratives.

Imagine the following scenario: Gil’s down on his luck and holds a yard sale. Bitcoin advocates from around town buy up his belongings. Unbeknownst to Gil, the stranger who bought his hotplate paid with tainted coins. The next day, Gil sends the proceeds to an exchange, only to have his account frozen and the authorities alerted. At best, Gil is left penniless; at worst, he becomes entangled in a legal nightmare for crimes he didn’t commit. …

As Ludwig von Mises wrote:

It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments.

Transparent blockchains, by their very nature, are incompatible with sound money. Fungibility is fragile and cannot survive without privacy. Digital assets that aren’t private by default become tools of control, putting our freedoms at risk. In a world where traceable digital payments are becoming the norm, private digital cash stands as a vital bulwark against the state.