Cryptocurrency and blockchain technology has the potential of changing the world the way the internet did in the early 2000’s. It is on the brink of disrupting multiple industries from the gig economy, to how we store data, to how we bank, to our very definition of currency and value itself. As with anything revolutionary it has the capacity to transform in both wonderful as well as harmful ways. So what are those ways and how do we balance the benefits with the risk?
Banking can be cost prohibitive for the lowest income group.
One transformation is the decentralization of banking. Banking is rarely thought of as a privilege, but the minimum requirement to open an account is often cost prohibitive for people in the lowest income bracket. In America alone 1/9 households do not have a checking account. There are often no branches or branch ATMs in low income areas, rural areas and villages. While it is impossible for this subset of people to open a bank account, this group who is already barely, if even, making ends meet, winds up paying more in check cashing fees or excess charges tacked on to pay bills with money orders than if they had a bank account.
Despite the expense of banking fees, the cost to cash a paycheck at a check cashing service or pay bills with money orders costs more than a bank would. There are often no branches or branch ATMs in low income areas or in rural areas and villages.
In a non-FIAT decentralized system such as a Coinbase account, in a world where crypto was accepted everywhere none of the above would be a problem eliminating another disadvantage low-income people struggle with that fits in with keeping them low income.
Another issue is the lack of trust in banks and government. While in the US this is definitely a concern as evidenced in 2008, in countries with unstable currencies and governments this is an even bigger concern. In the most extreme situations, the government can seize assets at any time, banks can shut down and even if neither of the previous happens, the local currency is still unreliable. With a currency that has nothing to do with banks or governments, such as Bitcoin, this problem can be solved. Crypto can also eliminate the imbalance in the opportunities for people in developing and unstable countries versus those in the developed world.
And then there is the issue of privacy. Banks are a centralized infrastructure which control the money and essentially own the identity of the person. Our data is sold in markets to insurance, credit card companies. The banks are not only not protecting our identity, they are profiting off of it. With a decentralized bank our identity would be anonymous and our own. Not for any institution to hold and profit off of when they are already profiting off of multiple fees we are paying.
Another huge advantage of privacy is we can send money and while a detailed ledger is kept, it is untraceable as to who sent it to whom. Even the government cannot get that information. Imagine the transformative ways that can change people’s lives. A woman in Saudia Arabia escaping an abusive family who wants to get an education can get money sent to her and can spend it where she wants, in a culture where a husband or father could demand to know a woman’s spending. There are 18 countries where women need to ask permission to get a job. If these women can work remotely and then get paid in crypto with no need for a local bank account, no husband’s permission would be needed. In Brazil where abortions are illegal, a woman who pays a doctor can not be identified through a payment and the doctor cannot be identified though payments either.
Unfortunately, these very same components that offer such world changing benefits, also create an opportunity for nefarious uses.
The decentralization of banking provides no backup. If Coinbase, for example, is to crash — not the website, but the company, there is no backup or protections, the way there are with banks, at least in the US and EU. If all your money is stored there, you could lose everything. If you somehow lose all your codes and lose your digital wallet, you might never be able to retrieve your money. If money is stolen from your account, or Binance is hacked and all money stolen, the government cannot help you. They would not be able to trace who stole it from where. People could be wiped out and as the Crypto world grows, so will the Hackers determination to crack the code, especially for a potentially multi-million dollar (if not billion dollar) crime they could very likely get away with.
The way the government and banks cannot know who sent money to whom, while that can be wonderful helping a woman escape an abusive husband in a country where the government and banking system would back him up, it is not so great, to say the least, for the many money exchanges of the “dark web.” In some of the worst but realistic cases, human trafficking, the underground slave trade industry, and the hiring of hitmen would not leave a traceable financial trail. In terms of country to country, a government for example could send vast amounts of untraceable money to affect another countries election.
So this leaves us with an ethical dilemma. To what extent does the government need to step in and regulate cryptocurrencies? To what extent should crypto protect someone’s privacy. The original heart of crypto and the whole mission is about freedom from government and decentralization of the banking system. When has that gone too far?
This is not a question with a cut and dry answer. Despite the concerns of crypto protecting traffickers, Blockchain technology is considered a potential solution to trafficking. In Moldolva, according to Cryptocoin News, “Blockchain will be used for storing the identities of children leaving the country so that the country can keep track of the children’s whereabouts and prevent them from being sold into slavery.”
While the internet itself has caused many problems from Silk Road to cyberbullying, it has vastly improved the world in ways that outweigh the bad. To end Crypto, to end the opportunity for an innovative economy based on non government dependent non-FIAT currencies would be a tragic mistake. Humanity has always had an evil part to it, and murders, war and cruelty have occurred since the start of time. To over-regulate something that will cause significantly more good than bad would be a huge mistake.
While zero regulation would be going too extreme, I think it is important to lean in the direction of allowing Crypto and Blockchain to develop and grow in a direction towards decentralization, a return to privacy, ownership of our identity, and freedom from government and baking systems. The details and balance will have to be figured out as we allow Crypto and blockchain to find their place in the world.