Following the financial crisis of 2008
Following the financial crisis of 2008, the public took a renewed interest in the ethics of the banking world. Not long after this period, digital or cryptocurrencies were developed and spread around mostly amongst digitally savvy communities. This small but technically astute community of developers came together to create what we understand as a distributed ledger or Blockchain in an effort to create digital currencies such as Bitcoin. Since the project’s start in 2009, Bitcoin has been the most successful digital cryptocurrency in terms of its popularity and user adoption. This innovative idea of a digital currency has lately gained a lot of traction and may likely play a major financial role in the future. Bitcoin is currently the most popular cryptocurrency, but many other alternatives exist. The ethics behind cryptocurrency is complex, in both its utility as well as its legitimacy as a potential financial instrument, but one primary concern for many is whether this new currency will benefit society as it is more widely adopted.
Cryptocurrencies bring many new innovative solutions to the current financial situation. Bitcoin as one example, offers an unprecedented ability for confidentiality during digital transactions. In utilizing cryptocurrencies between peer to peer transactions of goods and services, neither party need ever know the other’s identity, drastically different from a cash-based transaction through a financial institution. And without the regulatory structure of a government overseeing the currency, or even a banking institution acting as a middleman for digital transactions, oversight at this point in time is relatively scarce. The arguments for regulation and a moral rejection of digital currencies may seem appropriate, especially given the infamous trial and conviction of Ross Ulbricht, the infamous founder of the Silk Road online store which used bitcoins as a medium for illicit activities. Or, the blatant fraud committed by companies promoting initial coin offerings and disappearing upon receipt of funds. These cases lend tangible credence to the current evils associated with the use of digital currencies.
There are several controversies surrounding cryptocurrencies. Unlike conventional currencies, they are not pegged to a government-backed fiat dollar, meaning its value is relative and purely market or interest driven. One example is that they can be used to evade taxes as they encompass qualities of security and anonymity. The result is a secure, partially or fully anonymous, and decentralized electronic medium of exchange with no personally identifiable information. These features promote a potential way for people looking to hide funds from the government to do so. This unique situation currently presents an ethical challenge for people utilizing this technology on whether to comply or refute the legal boundaries that are far and in between regarding their taxation responsibilities as citizens. Furthermore, cryptocurrencies as a whole could potentially violate U.S. and the laws of governments worldwide, as it arguably competes with the U.S. dollar and other national currencies that have a legal right on the issuance of authorized legal tender.
The Internet and the subsequent rapid adoption of online transactions have ushered in a new dawn of transaction mechanisms such as cryptocurrencies. To date, cryptocurrencies have mostly been used to undermine security and we have a reached a pivotal moment in global society where financial transactions can take place without being traceable.
Blockchain based cryptocurrencies have the advantage of allowing payments with little or no transaction fees and requires no banking institutions to act as a go-between. This presents a unique challenge to private banks and our current way of life in dealing with monetary transactions. The underground market through the use of Darknet, have been known to use cryptocurrencies as a means for conducting illegal transactions. We see organized crime syndicates increasingly move operations online, and we can further expect to see cybercrime continue to develop into a highly lucrative and well-organized enterprise as these illegal enterprises use cryptocurrencies in their transactions around the world.
Is it ethical to steal? Surely, we’ve been taught or forcibly learned the rules of the law, but what rules govern cyberspace? With the advent of the Internet anyone with a computer or mobile device is able to instantly connect to the World Wide Web and perform any number of transactions instantaneously. Countries separated by bodies of water and land are interconnected in the digital world bringing social communities closer than ever before. The threat of ransomware is one of many concerns which raise the ethical issues of cryptocurrencies. There have been numerous cases of Hacking, utilization of code exploits, blatant fraud in terms of holding an Initial Coin Offering (ICO), amongst numerous other negative aspects which directly impact society as a whole.
Around the world, the sudden surge of interest in cryptocurrencies can primarily be attributed to the potential increase to one’s wealth in an extremely short period of time. It is within human nature to wish for a better life, and this new technology seems to be the vehicle of choice for many around the world. And with this increase in sudden popularity, there have been a surge of cybercrimes with the sole purpose of stealing and defrauding individuals of their cryptocurrencies. In many instances, theft of cryptocurrencies has led to a crossroads amongst developers and the user community by forcing the blockchain to split or “fork” in order to limit the further use of stolen cryptocurrencies. Not all agree or have accepted this new way forward, but changes have been made in the most utilitarian sense to provide the greatest benefit for the masses while foregoing the concerns or arguments presented by the few.
As with any technology, digital currencies are tools developed to meet a perceived need and is neither good nor evil in itself. It was certainly not the first medium of exchange used to purchase drugs or other illegal material, nor will it be the last. However, the immediate reaction of many governments worldwide was the call to shut down the proliferation of cryptocurrencies as it directly undermined their authority. Now, the discussion centers around regulation more than shutting down, but the impulse for drastic measures is similar. Much of the worry over digital currency comes from the lack of authority overseeing its use. Bitcoin, for example, places a high level of responsibility on the user. Transactions are irreversible, so both parties in an exchange must have established some form of trust. No third party facilitates the exchange of currency. Additionally, all transactions are transparently tracked by the very construction of the code. This allows a high degree of security from identity theft as well as a public regulatory framework lacking from governmental currencies. Hence many of the services that the economy relies on government to provide are hardwired into digital currencies.
All of this however, merely details certain structural benefits of cryptocurrencies. They say nothing about the morality of an un-sanctioned currency. Looking at Ross Ulbricht, the man convicted of running the Silk Road website, it is certainly not the spokesman anyone would want for an emerging technology. Between conspiracy, drug trafficking charges, and attempting to hire a federal agent to commit murder, Ulbricht seems to be a compelling argument against any and all uses of a digital currency (Mullin). However, this story is merely a highly visible anecdote, an outlier rather than a trend. Thousands of legitimate merchants accept bitcoin, and while it may not be integral to their business models, its use is significant as a counter to the one publicized illicit example.
There are always those who seek to exploit new technology. Or put another way, frontiers tend towards lawlessness as we read in our history books. There is always a period of adjustment before civilization takes hold when exploitation is easy. Eventually, authority catches up, and once again society can regulate itself and the rule of law will prevail. New technology, and especially these new digital currencies are comparable to the days of the gold rush. In the beginning you have criminals moving west, murdering, pillaging, and stealing. Outlaws are robbing miners and citizens with rampant lawlessness. But before too long, towns grow up and local authorities take control of the responsibilities of protecting its citizens. It wasn’t the gold that was the moral problem, but rather the morality and lack of ethics of a certain subsect of people during that time. The problem is adaptation, not unethical technology. It just takes time, and if digital currency catches on in a lasting way, its lawless days will be nothing more than a footnote in history.