Bitcoin is more than just an online payment system. After all, we have a lot of them: PayPal, Venmo, and the like. Bitcoin and other cryptocurrencies that are particularly used are: monetary For the Internet.
Fiat money is a nearly perfect way to pay someone. You don’t need an account. It doesn’t care who you are or what you buy. It’s a bearer instrument. I give you a dollar. Now you have the dollar and I don’t. It’s instant and no one can interfere with the transaction. You can’t trust someone else to make sure the dollar gets to you. Best of all, it’s private. There’s no record of this transaction at all. It’s so private that there’s an old joke in the cryptocurrency community: If money were invented today, it would be illegal.
But for all its advantages, paper money is useless online. In order to pay someone online, we have come to rely on a system of intermediaries to keep the money moving. We put our money in a bank, instruct the bank to send the money to a company like PayPal, then instruct PayPal to send the money to another PayPal user’s account, who then ultimately has to withdraw the money from PayPal to a bank account that they can choose to withdraw the money from.
Every step in this process is recorded in detail by each participating company and ultimately reported to the government. We have to rely on companies to voluntarily carry out our transactions, something that history has shown us should not be taken for granted.
Unfortunately, paper money is fading away as people prefer conveniences like Venmo. Even direct transactions for coffee that used to be done with paper money are now intermediary, meaning they are recorded, reported, and executed under rules set by companies and governments.
The fact that trade now flows through a relatively small set of intermediaries provides a convenient access point for authoritarian rulers to exert the pressure needed to control what the masses can and cannot do. This danger may seem remote to those of us living in stable democracies, but the reality is that states control financial systems and not all states respect the values of freedom of expression and association.
Bitcoin and other cryptocurrencies offer a solution to this problem. They work much like money. They are tools that can be used privately without the need for an account. They are money for the internet. They break the middlemen’s hold on our financial lives.
There are, of course, good reasons why governments might want to monitor the flow of money and impose restrictions on certain transactions. But we have increasingly seen governments succumb to the temptation to weaponize their control over intermediaries to contain political dissent. This is the ultimate flaw in regulation through intermediary finance.
When protests erupted in Belarus over rigged elections, the government was quick to crack down, including with financial sanctions. Protesters faced hefty fines, and employers were pressured to fire dissenting employees.
In response, the Belgium-based non-profit organization BYSOL provided financial assistance to the protesters. However, since the protests were deemed illegal, traditional financial intermediaries, in compliance with the law, confiscated the protesters’ money and froze their accounts. Electronic transfers were monitored, and cash was confiscated at the border. BYSOL turned to Bitcoin, allowing protesters to receive funds in personal wallets and make small transactions with locals, evading the state’s financial surveillance network.
In Russia, Putin’s opposition has been labeled an extremist group, making donations illegal. As in any country, financial intermediaries have had no real choice but to comply with the law. These intermediaries have effectively been used to police political activity. Alexei Navalny’s Anti-Corruption Foundation has turned to cryptocurrencies, bolstered by the privacy enhancements offered by tools like Wasabi Wallet, to survive. With this powerful new capability, Russian citizens can continue to save money to support their opposition to Putin.
In Myanmar, the military junta has imposed strict know-your-customer rules, imposed strict controls on cash transactions, and forced all economic activity into a monitoring system vulnerable to arbitrary account freezes. In Iran, new rules have been proposed to automatically deduct fines from the bank accounts of women who defy laws requiring the hijab.
Even in the United States, this problem may arise. The recent coup against Roe v. Wade This puts access to abortion services at risk. If funding abortion services becomes illegal, payment providers may be forced to comply with the law or provide evidence to law enforcement. Many abortion pill sites use services like PayPal and Stripe for payment, and if those services are cut off, cryptocurrencies could become a crucial alternative. Similar financial threats exist for access to all hot-button issues. It’s hard to control people, but it’s easy to control intermediaries.
Beyond the direct legal oversight of intermediaries, it is also important to consider another flaw in the intermediary financial system. These are private companies with their own considerations and values. Many of them are listed on the stock exchange, which makes them vulnerable to the whims of public opinion.
Why would a company like PayPal take the reputational risk of processing payments for industries that some find objectionable, even if they’re legal? There are countless instances of adult creators being kicked off platforms, or marijuana businesses, or outspoken political voices. Ultimately, it’s much easier for them to just fire these people so they can focus on their core business. If every company made the same calculation, these companies would effectively die even if they played by the rules.
At the same time, money, whether fiat or now crypto, is a neutral system, immune to the whims of not just tyrants but mobs. Cryptocurrencies are money for the internet. You don’t need an account, just a computer and internet access. They can’t have a say in what you do. They don’t spy on you. No one can interfere with your ability to transact with them. They are essential tools for protecting our ability to exist as free people in the digital age, and a brake on tyranny made much easier by the centrally mediated internet.
This is a blog post written by our guest Neeraj Agrawal. The opinions expressed here are entirely his own and do not necessarily reflect the views of BTC Inc or Bitcoin Magazine.