Sovereign Personal Currency Theory

Written by: Arjun Khemani

Translated by: Block unicorn

The core thesis of “The Sovereign Individual” is not that governments are evil or markets are benevolent, nor that technology itself is inherently liberating. Its argument is more structural and unsettling: the evolution of money depends on the balance between violence and information, and the information age permanently weakens the state’s control over currency.

In this view, money is not merely a medium of exchange or a bookkeeping unit; it is a form of power technology. Whoever controls money controls resource allocation, taxation, and ultimately social coordination. For most of modern history, the nation-state has dominated currency because it could control violence and surveillance. The book argues that this dominance is ending—not through revolution or collapse, but through obsolescence.

Money as a Logic of Violence

Historically, monetary systems have always aligned with the most effective means of coercion of their time. In feudal societies, wealth was land, and land was defended by force. In industrial societies, wealth shifted to factories and labor, with fixed geographic locations that required taxation. The nation-state thrived because capital was less mobile, transactions were transparent, and violence had scale advantages over individual escape.

Legal tender naturally emerged in this environment. It enabled states to fund wars, welfare, and bureaucracies through inflation and taxation. Enforcement was not only legal but also a reality that could not be escaped. If your labor, assets, and transactions were tied to a specific territory, resistance was futile. Money’s political nature stems from this lack of alternatives.

Information Shock

The information age breaks this balance. The key shift is not digitization itself but asymmetric liquidity. Capital is more mobile than labor. Censorship of information is more difficult than patrolling borders. Individuals—especially high-skilled, high-value ones—can leave jurisdictions faster than governments can adjust enforcement mechanisms.

Once capital can flow instantly, be stored digitally, transmitted peer-to-peer, and protected by encryption, traditional state controls weaken. Tax collection becomes harder, capital controls become riddled with loopholes, inflation is no longer inevitable but avoidable. The result is not immediate collapse but a slow erosion of monetary sovereignty.

This is the core insight of “The Sovereign Individual”: states lose control over money not because of popular rebellion, but because people choose to leave.

The Slow Erosion of Legal Tender

The book predicts that fiat currency systems will not collapse due to hyperinflation or political upheaval but will fail asymmetrically. The most productive, most liquid, and most informed groups will exit first. They adopt more advanced monetary technologies, reshape their legal and digital lives, and detach from the state’s fiscal base.

This creates a feedback loop. As the tax base shrinks, states raise taxes and tighten oversight of remaining populations. This accelerates further exits. Governments become increasingly predatory, more reliant on surveillance, and more fragile. What appears powerful—more regulation, stricter controls—is often a sign of decline.

Legal tender relies on coercion and opacity. When coercion weakens and opacity collapses, fiat currency becomes a tax on those least able to evade it.

Evolving Money

In the world of the sovereign individual, money is no longer a monopoly. It is not a single national currency enforced by law but a landscape of competing monetary systems. Individuals choose currencies much like they choose software: based on reliability, security, portability, and resistance to manipulation.

Successful forms of money share certain traits. They are difficult to inflate, hard to confiscate, borderless, permissionless, and resistant to censorship. Trust no longer depends on political discretion but shifts to cryptography and protocol design. Money becomes increasingly mechanized and less human.

“We reject: kings, presidents, and voting.

We believe: rough consensus and running code.”

— David Clark, 1992

The authors did not predict specific technologies, but their description of functional requirements was remarkably precise. Their argument implies that ultimately, the best money will prevail—not the most radical issuer.

The Sovereign Individual and the Declining State

This shift does not bring equality but creates a new form of stratification. Those with the knowledge, skills, and liquidity to operate in the post-sovereign monetary system will gain unprecedented autonomy. Those lacking these conditions remain trapped in the declining fiat system.

“In the future, a milestone of your financial success will no longer be how many zeros you can add to your net worth, but whether you can arrange your finances in a way that achieves complete personal sovereignty and independence.”

— James Dale Davidson and William Rees-Mogg, “The Sovereign Individual”

Meanwhile, governments are forced to compete. Citizenship is no longer just an identity but a service. Jurisdictions begin to market themselves based on tax efficiency, legal stability, and quality of life. Sovereignty starts to disintegrate. Legitimacy becomes conditional.

Money is no longer just a store of value; it becomes a tool of personal sovereignty.

Violence Loses Its Monopoly

“The Sovereign Individual” ultimately argues not just about currency but about civilization itself. Violence is losing its monopoly over economic coordination. Information, cryptography, and voluntary exchange, as organizing principles, increasingly surpass coercion.

Money is merely the first domain where this inevitable change manifests. Once money escapes political control, laws, governance, and identity will also transform. Nation-states will not disappear but will shrink, compete, adapt—or decline.

Conclusion

The theory of the sovereign individual’s currency can be summarized simply: when capital mobility exceeds government deterrence capacity, money ceases to be political and becomes an evolutionary product.

This is not a utopian prophecy but a prediction of selection pressures. Monetary systems aligned with realities like information, liquidity, and cryptography will survive, while those relying on force, opacity, and inertia will perish.

The future of money is not dictated by ideology but by exit mechanisms.