Cryptocurrencies like bitcoin promise only false solutions for vulnerable communities
The Independent | 20 September 2021
Developers seek out populations suffering debt crises, war and climate disasters, the more scarred from past colonial abuse the better, to experiment and incubate new crypto ideas
Celebrity tech fans have long preached the emancipatory potential of cryptocurrencies like bitcoin. Twitter CEO Jack Dorsey, Gwyneth Paltrow and even filmmaker Spike Lee have all joined the bitcoin choir. They claim crypto will free those who are systematically oppressed and excluded from the mainstream economy. There’s a Native American on the US nickel, Spike Lee points out in a recent bitcoin promotional video, “but people don’t even stop to pick a nickel up from the sidewalk”. Old money is out, he says, bitcoin is in.
For developing countries, as an alternative to their own weak currencies, bitcoin is touted as a way to leapfrog legacy systems, offering access to financial products and greater autonomy.
But crypto developers are not necessarily drawn to oppressed folk because they want to fix things. Poverty, oppression, and corruption are the ideal conditions for crypto entrepreneurs to extract resources, find new punters and perform real-world tests.
Take the Native Americans. The Navajo Nation experiences the highest rates of poverty, crime, alcoholism, incarceration and suicide of any racial group in the US. Nearly 15 per cent of Navajo suffer extreme poverty, putting the nation on a par with Haiti. They are the third largest coal producers in the US, but of the 55,000 indigenous households located on Navajo lands, more than 14,000 do not have access to electricity.
Even so, the Navajo Tribal Utility Authority (NTUA) last month agreed a “landmark deal” to offer 15 megawatts of electricity per year to foreign bitcoin miners. That energy is enough to power 14,000 homes. Instead, the deal gives bitcoin miners access to subsidised electricity at less than a tenth of the price paid by other US buyers.
Across North America, following the Chinese government’s recent bitcoin crackdown, crypto fans are keen to scoop up the glut of second-hand mining equipment. The bargain bitcoin machines have also made their way to Iran, Moldova and the Black Sea territory of Abkhazia, where bitcoin mining has been blamed for overloaded electricity lines and power station fires, leaving many without electricity for days.
Bitcoiners are attracted to these places because of their subsidised energy. But these subsidies were designed to reduce fuel poverty and increase industrial production, rather than upping the profits of foreign bitcoiners.
Bitcoin can also be bad news for human rights, allowing despots, tyrants, and terrorists to curtail international controls while raising revenue for illegal activities. Bitcoin has helped fund Isis operations and the Taliban in Afghanistan.
Belarusian President, Alexander Lukashenko, has also become one of the latest tyrants to join the crypto fraternity. While promoting Belarus’s shaky nuclear power facilities to bitcoiners, Lukashenko is carrying out a full-scale assault against civil liberties, according to a UN report. His forcible diversion of a Ryanair flight in Minsk earlier this summer to arrest a political critic proves that human rights are not a top priority for crypto-loving Lukashenko.
Crypto critics face arbitrary arrest in El Salvador, where bitcoin recently became legal tender. That’s despite 70 per cent of Salvadorans disagreeing or strongly disagreeing with President Bukele’s new “Bitcoin Law”. But the sorry statistics and frequent protests have not stopped the autocratic leader from pushing ahead, forcing all retailers with an internet connection to offer crypto payment options.
The Bitcoin Law was co-written by 27-year-old Jack Mallers from Chicago. A tearful Mallers presented his big bitcoin experiment after the US threatened to pull El Salvador’s IMF support package due to concerns around extrajudicial killings and Bukele’s human rights abuses.
Despite claims that bitcoin helps El Salvador’s poorest by leapfrogging legacy finance and “banking the unbanked”, research from Northumbria University suggests that neo-colonial land grabs, amassing user data and other resources are the main draw cards for crypto-bros.
“Crypto-colonialism” is a hi-tech form of “disaster capitalism”. Developers seek out populations suffering debt crises, war and climate disasters, the more scarred from past colonial abuse the better, to experiment and incubate new crypto ideas.
The El Salvador experiment aimed to show that bitcoin could be used at scale using third-party apps. Instead, it proved how flawed bitcoin is. The network’s poor security, tiny per-second transaction limit, high fees and price volatility make barter and real money safer bets.
But other “smart contract” cryptocurrencies, such as Ethereum and Cardano, are a very different kettle of fish. Smart contracts are automated conditions encoded into cryptocurrency tokens. Individual citizens, and even whole populations can lose their economic sovereignty, while tech companies and governments track and manage how citizens’ funds are spent.
Cryptocurrency projects such as AidCoin, Promise and Humanity Token are using the technology to micro-manage the lives of those in need. Charities and the poor must behave in the interests of the donor. According to the Promise website: “If a [charity’s] project falters or fails, the funds not yet released [to the charity] can be returned to you as the donor to be donated to a new project.”
Smart contract technology is being rolled out at scale in Ethiopia using Cardano, the world’s third largest cryptocurrency. While civil war has left vulnerable people and local infrastructure in tatters, the US tech firm is building Ethiopia’s new citizen ID and record systems.
Digital ID schemes are intolerably hot potatoes in the US and UK due to snooping concerns. But Cardano goes further, aiming for their smart contract crypto to be legal tender in Ethiopia and beyond, without public debate. Where local interests sit squarely at odds with the Ethiopian government, unruly populations could be easily disciplined with Cardano code. As well as setting its sights on Central America and the African continent, Cardano also sees potential in war-torn Afghanistan.
Cryptos are finding fertile ground in poor communities left behind by the mainstream global economy. But cryptocurrencies can’t fix the roads, or free people from oppressive governments and grinding poverty.
To me, they’re offering only false solutions, surveillance and hi-tech snake oil medicine.