Bitcoin is much more than a typical online payment system. After all, we have plenty of those: PayPal, Venmo, and the like. Bitcoin and other privately used cryptocurrencies are cash for the internet.
Paper cash is an almost perfect way to pay someone. You don’t need an account. It doesn’t care who you are or what you’re buying. It’s a bearer instrument. I hand you a dollar. Now you have the dollar and I don’t. It’s instant and no one can interfere with the transaction. There is no trusting someone else to make sure the dollar gets to you. And best of all, it’s private. There is no record of that transaction whatsoever. It’s so private that there is an old joke in the cryptocurrency community: If cash were to be invented today, it would be illegal.
For all its benefits, however, paper cash is useless online. To pay someone over the internet, we have come to rely on a system of intermediaries to keep money moving. We put our money in a bank, direct that bank to send money to a company like PayPal, ask PayPal to send the money to another user’s PayPal account, they then finally have to withdraw from PayPal to a bank account from which they could choose to withdraw cash.
Every step in this process is recorded in detail by each involved company and ultimately reported to the government. And we have to rely on the companies to voluntarily execute our transaction, something which history has shown should not be taken for granted.
Unfortunately paper cash is dying as people opt for the convenience of tools like Venmo. Even face-to-face transactions for coffee that would have once been handled with paper cash are now intermediated, that is, recorded, reported, and executed under the rules set by corporations and the government.
The fact that commerce now flows through a relatively small set of intermediaries provides a convenient access point for authoritarians to place pressure needed to control what a populace can and can’t do. This risk might seem remote to those of us in stable democracies, but the reality is that states control financial systems and not all states uphold values of free expression and association.
Bitcoin and other cryptocurrencies offer a solution. They operate in a manner much more similar to cash. They are bearer instruments that can be used privately without an account. They are cash for the internet. And they break the control of intermediaries over our financial lives.
There are of course valid reasons why governments might want to monitor the flow of money and place restrictions on certain transactions. But we have increasingly seen a rise in governments succumbing to the temptation to weaponize their control of intermediaries to contain political dissent. This is the great flaw of regulation through intermediated finance.
When protests erupted in Belarus over a rigged election, the government swiftly cracked down, including through financial punishments. Protestors faced heavy fines, and employers were pressured to fire dissenting employees.
In response, the non-profit BYSOL, based in Belgium, provided financial aid to protestors. However, as the protests were deemed illegal, traditional financial intermediaries, complying with the law, seized protester funds 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 swaps with locals, evading this net of state mandated financial surveillance.
In Russia, Putin’s opposition was labeled an extremist group, making donations illegal. As in any country, financial intermediaries had no real choice but to comply with the law. These intermediaries had been effectively weaponized to police political activity. Alexei Navalny’s Anti Corruption Foundation turned to cryptocurrency, supercharged with the privacy enhancements provided by tools such as Wasabi Wallet, to survive. Russian citizens could continue putting money behind their opposition to Putin with this powerful new capability.
In Myanmar, the Junta implemented strict Know Your Customer rules and cracked down on physical cash, forcing all economic activities into a surveilled system prone to arbitrary account freezes. In Iran, new rules have been proposed to automatically deduct fines from the bank accounts of women who defy laws mandating a Hijab.
Even in the U.S., this issue could arise. The recent overturning of Roe v. Wade endangers abortion access. If funding abortion services becomes illegal, payment providers might be forced to comply with the law or provide evidence to law enforcement. Many abortion pill websites use services like PayPal and Stripe for payments, and if these services are cut off, cryptocurrency could become a crucial alternative. Similar financial threats to access exist for all hot-button issues. It’s hard to control people but it’s easy to control intermediaries.
Moving beyond direct legal control of intermediaries, it’s also important to consider another flaw in the intermediated financial system. These are private companies that have their own considerations and values. Many of them are publicly traded. This makes them susceptible to the whims of public opinion.
Why would a company like PayPal take on the reputational risk of processing payments to industries that some find unsavory, even if they are legal? There are endless cases of adult creators being kicked off platforms, or marijuana businesses, or outspoken political voices. At the end of the day, it’s a lot easier for them to just kick those people out so they can focus on their core business. If every company makes that same calculation those businesses are effectively killed even if they followed the rules.
Meanwhile cash, both paper and now cryptocurrency, are neutral systems that are immune from the whims of not only authoritarians, but the mob as well. Cryptocurrencies are cash for the internet. You don’t need an account, just a computer and internet access. They can’t have an opinion on what you’re doing. They don’t spy on you. And 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 era and are a check on authoritarianism made so much easier by a centrally intermediated internet.
This is a guest post by Neeraj Agrawal. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.