Crypto isn’t inherently good in just its development and proliferation; the community must address the reasons causing financial exclusion.
On Sept. 27, Coinbase CEO Brian Armstrong sought to center his employees’ work around the company’s core mission: “to bring economic freedom to people all over the world.” Armstrong argues for a narrow interpretation of Coinbase’s mission to build the best possible product because it is “already hugely ambitious” and because companies generally cannot succeed if their goals “include all forms of equality and justice.”
Armstrong’s perspective is not unique to Coinbase and represents a broader tech industry incarnation of the white-savior complex rooted in the belief of the product’s inherent goodness. This belief is especially noteworthy in crypto, given its diversity problem. Views like Armstrong’s, when coming from a mission-driven cryptocurrency organization, ignore and insult the people and organizations on the ground doing the critical work to financially empower communities. Furthermore, these views overestimate the ability of cryptocurrency to address financial exclusion caused by structural problems as well as technical ones.
The technology of cryptocurrency offers solutions and features critical to increasing financial inclusion. Payments can be made in places where cash is at risk of being stolen and where bank accounts are inaccessible. They can also be made anonymously and tied to contracts, all without the need for third parties.
The technical advantages of cryptocurrency, however, do not line up perfectly with the root causes of financial exclusion. So, while companies such as Coinbase do important work proliferating cryptocurrencies, achieving economic freedom requires more, and crypto projects must be honest about their opportunities to improve financial inclusion as they reckon with their own limitations. If they are not interested in economic prosperity and freedom, that is perfectly fine — a company’s end goal is its bottom-line profits after all. But if crypto organizations are to legitimately claim a social mission, they must step out from behind their computer monitors to address the limitations of their technical products. Otherwise, their platitudes for financial prosperity read like an investment bank asserting that it brings economic freedom to the world through increasing market liquidity.
The limitations of cryptocurrency
While cryptocurrency offers novel ways to create a new financial system, the technology and its proliferation cannot solve the underlying causes of financial exclusion alone. Today, 1.7 billion people do not have access to a bank account, and billions more do not have access to other basic financial services because institutions have long ignored and oppressed these communities. Of the people who do have access to the financial system, many are trapped in a cycle of debt without the means to generate wealth. According to The Boston Globe, the median net worth of non-immigrant African-American households in Boston is $8. The history of marginalization that cryptocurrency will have to grapple with manifests itself in lack of connectivity, distrust in technology, financial illiteracy, and historical economic and social inequality.
Cryptocurrency requires internet access. Today, only 59% of the world has access to the internet. Smartphones, which serve as a lower barrier to entry for people to access the internet, have a penetration rate of only 45%. Hidden within these statistics, however, is the fact that many people who do have internet or smartphones may not have stable connections or regular access to electricity. The overall result is a digital divide preventing billions of people from using cryptocurrency.
Crypto is a novel technology that looks to upend some of the most basic forms of everyday life. Fiat currency is not just an everyday tool but the very basis of people’s livelihoods. Distrust in cryptocurrency is to be expected, particularly when people cannot see the physical transaction and when mistakes as simple as a forgotten password can make money unrecoverable. Distrust is also higher among people with low income and limited education — the same people who are most likely to be unbanked or underbanked.
Financial illiteracy is also tied to distrust. Financial institutions may offer difficult-to-understand financial products or training, particularly in emerging markets, and some take advantage of consumers through products such as predatory loans. Lack of financial knowledge also stems from a broader inability to access resources or spending adequate time to understand financial products. As a result, financial illiteracy may prevent people from knowing how or why to use cryptocurrency.
Most importantly, financial exclusion is the result of poverty and inequality tied to oppression. Throughout history, institutions and people in power have excluded or marginalized certain communities, such as women, minorities, rural residents and LGBTQ+ people. Financial institutions have been part and parcel of this historical exclusion and oppression.
In the United States, we cannot separate finance from its history in slavery or more recent racial discrimination in lending. Similarly, in Europe finance is intricately tied to colonialism. The history of oppression connects seamlessly to current wealth inequality and financial exclusion. If people do not have enough money, they simply have no need for access to the financial system.
Cryptocurrency does not generate wealth simply from nothing — it only facilitates the holding and transfer of wealth. Without ways to generate wealth and amid widening economic inequality for over 70% of the global population, people will still find it difficult to use cryptocurrency or have no real use for it at all.
For cryptocurrency to meaningfully move “the needle on large global challenges,” as Armstrong writes, the underlying causes of inequality must be addressed. And while mission-driven cryptocurrency organizations cannot expect to do this alone, they have an important role to play in developing and directing their products to be used in the service of addressing the underlying problems. Those who declare they’re on a social mission inevitably sign themselves up for this challenge.
Accounting for cryptocurrency’s limitations
Cryptocurrency offers a novel technical solution to creating a new financial system — this achievement should be celebrated because it has the potential to be truly transformative. It can be used by people in economically unstable countries such as Argentina to avoid currency volatility or to make anonymous transactions in the face of repressive regimes, for example, Venezuela’s. In politically stable countries, cryptocurrencies can change everyday life, too. They give the means to bypass intermediaries that may not be robust, impose exorbitant costs, collect and sell user data, or exclude marginalized groups.
Cryptocurrencies can create a financial infrastructure uniquely suited to addressing financial exclusion, but without enabling easier access to that infrastructure, its benefits are not fully realized. In response, companies can design easy-to-use crypto products and invest in educating their users. They might also build mobile-friendly decentralized applications, optimize for cheap smartphones and low-bandwidth connectivity, lower the technical barriers to become a validator, and create easy-to-understand user interfaces.
But the real barrier is poverty and people’s inability to access the most basic infrastructure, including the internet and smartphones, which are outside of a cryptocurrency company’s direct mandate. Unlike a traditional company, a mission-driven crypto organization will have to dedicate its resources to addressing these more underlying systemic problems. This can take the form of funding initiatives to increase internet access and financial literacy or engaging in social activism by supporting community organizations working on the ground to alleviate poverty.
A mission-driven company will have to understand the societal problems of today and determine when they can be solved by technology and when they require something more entirely.
Active engagement to do good
Companies are not inherently virtuous because they create technologies that might be used for good. Technology is neutral and open to the direction of anyone who can afford it. Good comes from the active development and implementation of technology by people and mission-driven organizations seeking the resolution of social problems. Mission-driven cryptocurrency organizations, therefore, must take responsibility for how their technology affects people’s lives and deliberately engage in broader social activism. To effectively do this, they need to be proximate to the communities in question and treat them as equal partners in the quest for social good.
Twelve years ago, Satoshi Nakamoto published the technical design for Bitcoin (BTC) during a financial crisis originating from historically exclusionary institutions. The crisis of economic inequality, however, has not ended as evidenced by protests in the U.S. for racial justice and the COVID-19 pandemic, with a severe and disproportionate economic impact on minorities and women. The financial system needs to be reimagined in order to promote global economic prosperity. In this effort, cryptocurrency organizations can be a crucial player when they engage beyond their technical products to also address the root causes of financial exclusion.
Armstrong is not wrong when he says that the trendy social activism of Silicon Valley companies has “the potential to destroy a lot of value at most companies.” Doing good costs time and money, and it is rarely profitable. If it were so easy and rewarding, financial exclusion would likely not be a problem for billions of people in the first place. But that is the point. If a company is to claim that it is mission-driven, it cannot simply make its products and assume that it will be used for good. Even if that assumption is correct, a mission-driven organization must do part of that work itself if it is to ensure its products and work are directed toward doing good.
The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
This article was co-authored by Nikhil Raghuveera and Stewart Scott.