Cryptocurrencies are digital units of value tracked on encrypted, networked digital ledgers known as blockchains. The first cryptocurrency, Bitcoin, appeared for public use in 2009. It offered a currency that required no centralized validating institution, such as a bank or government. Then, in 2015, the Ethereum blockchain appeared. Rather than merely tracking tokens, this ledger can host applications, known as decentralized apps or dapps. The most significant use of this technology so far has been the development of decentralized finance, which decouples complex financial operations and instruments from traditional banking infrastructure. If Bitcoin suggests the possibility of unmediated value, decentralized finance suggests the possibility of unmediated credit. Whether it can be realized or not, for social good or otherwise, the basic possibility of these simple concepts is revolutionary.
2021 brought the first high-profile debate on American public policy and cryptocurrency. A provision of the Senate’s infrastructure bill sought to increase transparency around crypto transactions by raising reporting requirements for “brokers.” Experts, however, objected that the definition of broker was so broad as to include blockchain developers and “miners,” (people who create and maintain cryptocurrencies through the expenditure of processing power). People working in these areas are often uninvolved in the commercial exchange of cryptocurrencies, and in many cases, it would be impossible for them to obtain the information the new statute requires they report.
This is only the highest profile episode in a growing American debate about cryptocurrency regulation. Because an essential part of the technology is its independence from governmental authority, cryptocurrency sees a great deal of use in criminal ventures such as money laundering, drug trafficking, and ransomware attacks. Many cryptocurrencies may really be securities, requiring the application of a federal regulatory framework that currently does not reach them in any practical sense. But this debate also risks obscuring the substance of the issue. Opponents and proponents often characterize the matter in vague, moralistic terms—either cryptocurrency is the irredeemable tool of criminals, speculators, and polluters, or it is a vital technology that America must control as part of its economic development and competition with foreign powers. While there are plenty of clues as to which side of the debate Democrats, Republicans, liberals, conservatives, socialists, or libertarians should pick, there has been little specificity about what cryptocurrency actually is, does, or can do.
For wealthy Americans, which in the global perspective is almost all Americans, the practical advantages of a currency free from direct government control seem nonexistent or unnecessary. These are voters and donors the US government benefits from keeping happy, aggressively pursued as customers by major banks and investment firms; for them, the American currency regime works well. Why shouldn’t it? The United States is still the most powerful political and economic country on Earth, and its entire socio-political order rests on the stable and reasonably prosperous continuation of shareholder democracy.
The same cannot be said of the currency regimes under which many other people in the world live, however. Many populations remain, by virtue of poverty or politics, unappealing or unavailable as customers to the banking state. These people face poor or non-existent access to even basic banking services, crippling inflation in their local currency, and draconian capital controls aimed at protecting plutocratic elites or maintaining political repression. In Argentina, for example, inflation ran upwards of 25% annually for a decade, and the purchase of foreign currencies has been strictly limited and heavily taxed. This is a pervasive, day-to-day economic reality that borders on unimaginable for almost all Americans—and it is one in which the potential benefits of an unmediated, apolitical currency such as Bitcoin are easier to conceptualize.
In Nigeria, the utility of cryptocurrency was recently shown by activists leading major demonstrations against police brutality. Nigerians were protesting the country’s notorious Special Anti-Robbery Squad (SARS) accused of a variety of human rights abuses. These protests reached a high point in 2020, prompting the government to freeze the bank accounts of individuals and activist organizations involved. But the government could not interdict donations in cryptocurrency, which sustained the protests and contributed to their ultimate success in achieving the dissolution of SARS. As a result, Nigeria, one of the most populous and fastest-growing countries in the world, is now home to rapid, broad-based cryptocurrency adoption.
Many more examples of countries where cryptocurrency could meet or already is meeting immediate, practical popular needs could be provided. Americans, living and working in the global economic metropole, have not had to worry about many financial challenges that for billions of people around the world are crucial, daily facts of life. To the rapidly growing number of such people who have already adopted various cryptocurrencies to address these problems, the question “what is cryptocurrency good for” has already been answered.