- The legacy financial system and its political representatives regard crypto as a threat to its hegemony.
- “The majority of perception is due to misunderstanding a fundamentally new and innovative class of technologies.”
- “The best investment that can be made would be around education.”
Few of us are strangers to double standards, particularly those to which Bitcoin (BTC) and cryptocurrencies, in general, are often subjected. Whether we’re talking about environmental impacts or money laundering, crypto often appears to be held to an unfair, higher standard than the legacy financial system, at least when it comes to coverage in the mainstream media or statements by officials.
According to industry players speaking with Cryptonews.com, this is for a variety of reasons, yet two are worth highlighting in particular. First, the legacy financial system and its political representatives regard crypto as a threat to its hegemony, while secondly, the sheer novelty of crypto simply means that many figures within the established order find it strange and unfamiliar.
However, while we continue to see Bitcoin and crypto receive unequal treatment in various areas, most industry participants are hopeful that the situation will change over time. Because the more cryptocurrency is adopted, and the more crypto-related education is provided, the less the emerging sector will suffer from double standards and unfair treatment.
Crime and manipulation
“One of the most egregious examples of double standards within the media narrative around blockchain technology is that it’s fundamentally a technology used for nefarious purposes. More specifically, cryptocurrencies are often condemned as a tool that enables money laundering, when in reality, the distributed ledger technology and blockchains that power cryptocurrencies are transparent public ledgers logging all activity pseudonymously,” said Cooper Kunz, the Chief Technology Officer at social marketplace Calaxy.
Indeed, the industry sees this all the time, with headlines reporting on how, for example, the European Central Bank’s Christine Lagarde has flagged up Bitcoin’s use in money laundering. We also regularly see banks refusing to facilitate transfers to and from crypto exchanges, ostensibly because such exchanges are a hive of illicit activity.
Of course, studies from Chainalysis have revealed that criminal activity accounted for only 0.34% of all crypto-related transaction volume (or USD 10bn) in 2020, down from 2.1% in 2019. Meanwhile, the United Nations reports that money laundering volumes (in fiat currencies) currently stand at USD 1.6trn per year, or 2.7% of global GDP.
Other industry figures highlight this inequality in treatment, with GuardianCircle founder Mark Jeffrey noting that when crime is committed on a transparent blockchain, it’s actually significantly easier to trace and track down the perpetrator.
“Some of the biggest recent pedo ring takedowns were only possible because the perps were stupid enough to use Bitcoin [e.g. in 2019, in 2021]. And in DeFi, some of the largest thefts were quickly returned once the thief realized there was no way to cash out to fiat without getting busted,” he told Cryptonews.com
And yet, this false image of ‘shadowy super coders’ is spread by people like US Senator Elizabeth Warren, Jeffrey added.
“These people and mechanisms are the most transparent and open in history — far more so than the dark banking world Warren protects.”
Continuing on from this, Jeffrey suggests that probably the worst example of double standards affecting crypto is the ongoing US Securities and Exchange Commission (SEC) refusal to approve an exchange-traded fund backed by a “physical” BTC.
“There is no question this should have happened long before now — the SEC is clearly blocking it for reasons other than ‘protecting investors’ — it seems they are protecting big banks from healthy competition,” he said.
“I thought that if we had applied our standards as we have applied them to other products, we would already have approved one or more of them. With each passing day, the rationale that we have used in the past for not approving seems to grow weaker.”
The rationale in question — that the bitcoin market is subject to manipulation — isn’t something that’s applied as forcefully to the stock market. Indeed, with the likes of Elon Musk manipulating Tesla’s stock price with false ‘going private’ tweets, and with the SEC charging stock traders for multimillion dollar manipulation schemes almost every year, it’s clear that crypto isn’t the only area of finance with a manipulation problem.
Next up is the environment, where Bitcoin and crypto also suffer from unfair treatment and criticism.
“The most prominent example of this phenomenon is probably the discussion around the energy consumption and carbon emissions created by blockchains based on proof-of-work models, where highly misleading comparisons are drawn between certain applications of an emerging technology and countries or industry sectors,” argued Jan Stockhausen, Chief Legal Architect at decentralized insurance platform Etherisc.
According to him, this isn’t comparing apples with apples and it’s unfair to measure this one technology with such a yardstick while not doing likewise with any other sectors or technologies.
Similarly, you may have encountered a recent paper on Bitcoin’s apparent e-waste problem, with the cryptocurrency’s network of miners producing around 30 kilotons (or 30,000 metric tons) of electronic waste (e.g. discarded mining units) per year. This may sound horrendously bad, but note that according to the UN’s Global E-waste Monitor 2020 report, the world generated some 53.6 million metric tons of e-waste in 2019.
Put differently, Bitcoin accounts for around 0.056% of the world’s e-waste.
Opposition, ignorance, unfamiliarity
When asked to explain why Bitcoin and crypto tend to suffer from unequal treatment, industry players tend to coalesce around the same couple of reasons.
“One factor is that central banks simply view crypto as a threat to the traditional financial system, and as such, negative sentiments stemming from these legacy institutions are unsurprising,” said Alexander Filatov, Cofounder and CEO at TON Labs.
Most commentators working within crypto agree with this observation, with Spectre.ai Managing Director Kay Khemani noting the increased democratization and decentralization of capital that cryptoassets will help bring about will likely result in a loss of control and power for the current powers that be.
“This perhaps instills a feeling of dread amongst the proverbial flag bearers, who work so hard to defend today’s status quo,” he told Cryptonews.com.
For Mark Jeffrey, the fear of losing (some) power and authority often combines with issues related to age, with older generations — typified by “Yellen, Warren and their ilk” — arguably unable to understand concepts of digital ownership. Yet he also notes that the crypto industry presents the legacy financial system with a real commercial rival, one that could really dent the banks’ bottom lines.
“When Coinbase tried to launch Lend, it would have provided 5% annual interest. That’s 100x what most banks provide today. There was a very real threat that vast sums would be pulled out of old school banks and into Coinbase — it was a no-brainer. This would have hollowed out the banks,” he said.
Hence, the SEC threatened Coinbase with a lawsuit, and Coinbase dutifully canned the planned product.
What can be done?
Given that the current financial system is the globe’s de facto center of power, and that it views crypto as a real threat, what can the cryptoasset industry actually do to change the current situation and avoid unequal treatment in the future?
“Keep doing what it’s doing. Keep growing. Keep getting more people invested and shouting at their representatives to allow crypto to flourish,” said Mark Jeffrey, adding that crypto will ultimately flourish despite ongoing attempts to stifle it via regulation.
Continued growth will probably be the biggest factor in improving crypto’s reputation and treatment, but another key ingredient will also be education. This is what Cooper Kunz suggests, adding that it will take time for the environment to change in crypto’s favor.
He concludes, “I think the majority of perception is due to misunderstanding a fundamentally new and innovative class of technologies — so the best investment that can be made would be around education. It is important to consider how long it took the public to truly understand new technologies such as the internet, and how it would impact their lives.”