While cryptocurrency has been hailed for its potential in the financial sector of the developed world, one of its greatest applications has been virtually overlooked. In nations that lack dependable economic systems or governance, digital currency may offer hope. Access to finances, security and privacy of funds, and faith in a common medium of exchange can aid many across the globe.
When Satoshi Nakamoto invented bitcoin in the wake of the American subprime mortgage crisis, the little-known blockchain currency sold for pennies on the dollar. It’s hard to even imagine, now that bitcoin trades for thousands of dollars.
In those early days, the promise of cryptocurrency centered on the ability to transfer value without the need for a trusted third party to mediate exchanges. This promise has never waned, but nearly a decade later, the political and economic ramifications of cryptocurrency have not been fully realized.
Whether this is due to a dearth of technology (scaling obstacles) or cryptocurrency publicity, the revolutionary usage of virtual currency has remained surprisingly limited. Cryptocurrency remittance services have sprung up as an alternative to Western Union, and international organizations have employed blockchain technology to assist refugees. Still, it appears that many of the communities most desperate for this innovation have yet to embrace the monetary haven.
This is not just a solution to the plight of the “unbanked.” Rather, it is a method for allowing economically or politically subjugated populations to control their own wealth. Non-fiat digital currency can bring millions of people into a secure and person-driven global economy.
Government-sponsored virtual currency does not afford the protections of non-fiat virtual currency. Conceivably, a government could control wallets, coin distribution (and taxes), and even entire blockchains. Bowing to the auspices of conventional political structure is not the goal here. Otherwise, the digital world faces the same constraints as its tangible counterpart (paper money).
As observed by the Foundation for Economic Education, non-government cryptocurrency can support the freedom of speech. For example, between 2012 and 2014, Brazilian political dissident Daniel Fraga was sued by the state for “moral damages” after criticizing a local politician and judge. By cleverly converting his real (the Brazilian currency) into bitcoin, Fraga managed to protect his finances from the oppressive court and maintain his freedom of speech. Without access to Fraga’s bitcoin wallet, the Court had no recourse to extract a fine from Fraga. All he lost was the five dollars he left in his checking account.
The intangible nature of digital currency means that a government cannot physically remove the wealth of a citizen. This paradigm shift is a monumental step forward in the social contract, providing an additional layer of security to individuals.
All populations, especially those that are disadvantaged, need a way to maintain access to their wealth from anywhere in the world. Imagine if a refugee was able to access a bank account even after being displaced from their home country. This could help maintain the refugee’s dignity and hopefully diminish the extreme poverty caused by this terrible upheaval.
This is the unrealized potential of virtual currency. In a nation where political activists are jailed, or inflation runs rampant, non-fiat virtual currency may offer an escape.
During the Greek government-debt crisis, cryptocurrency was floated as an alternative to the country’s participation in the Eurozone. At the time, finance minister Yanis Varoufakis expressed his doubts on his personal website.
“While it is true that local communities have, in the past, generated successful communitarian currencies (that enabled them to improve welfare in their midst, especially at a time of acute economic crises), there can be no de-politicised currency capable of ‘powering’ an advanced, industrial society.”
Varoufakis’ critiques of bitcoin specifically included its “unavoidable deflation” as well as “faultlines” between speculators versus users of the currency. He’s right that bitcoin is deflationary, but for the purpose of political dissidents, this has no bearing on its utility. Cryptocurrency is not without its pitfalls. Bitcoin, for one, is shockingly volatile and there’s a massive wealth gap between early adopters and folks who are late to the digital party. These are valid critiques, but the freedoms afforded by non-fiat cryptocurrency far outweigh the imperfections.
Admittedly, the present volatility of the cryptocurrency market functions as one more barrier to adoption in the developing world and the monetary policy of code is not yet demonstrably sound.
At its core, a currency is nothing more than a promise of value. This makes paper money simultaneously invaluable and worthless. The same logic applies to virtual currency. Essentially, all money rests on the socialized acceptance of value. Removing governments from this value judgment might allow depressed societies to seize control of their financial futures and perhaps provide a path toward enhanced democratization in the developing world. Outside of turning off a nation’s electrical grid or limiting internet access through internet service providers, there is little a government can do to censor the usage of virtual currency. At that point, a country would have a lot of civil unrest on its hands. Retaining centralized power would be about as effective as clenching sand in one’s fist.
Cryptocurrency is humanity’s greatest iteration on the aphorism that there is strength in numbers. For many, virtual currency could become the next step in the social contract – a world that lives, breathes, and functions outside the boundaries of a government. A non-fiat virtual currency emphasizes decentralization and intangibility – two tenants that are almost impossible to defeat. Through cryptocurrency, these virtues might facilitate an economic and political reawakening.