IMG-LOGO

Bitcoin is no ‘silver bullet’ for money’s ethical problems

News Feed - 2024-06-10 10:06:00

Stephen Katte10 hours agoBitcoin is no ‘silver bullet’ for money’s ethical problemsBoth Bitcoin and fiat currency are often in the firing line over ethical concerns, with a dedicated group of defenders and critics.1014 Total views12 Total sharesListen to article 0:00AnalysisOwn this piece of crypto historyCollect this article as NFTJoin us on social networksFiat money and cryptocurrencies share similar use cases but both come with drawbacks that critics claim make them unethical to use. 


Common arguments for Bitcoin (BTC) being unethical include its impact on the environment through high electricity costs from mining, along with potential use by criminal elements, and the lack of regulation and user protections.


Conversely, critics of fiat money argue that it is unethical, as it is not backed by a physical commodity like gold. This means there is no limit on how much central banks can print, leading to severe social harm.


Speaking to Cointelegraph, Charles Adams from United Kingdom-based hedge fund manager Nickel Digital Asset Management, said he thinks both currencies have ethical considerations, but overall, Bitcoin is ethically stronger due to its inherent inclusion, transparency and immutability: “Bitcoin’s blockchain technology provides a public, decentralized ledger where all transactions are recorded and verifiable by anyone.”


“Additionally, it is hard to overlook that fiat currency is also frequently used in money laundering and other crimes. In fact, cash remains the currency of choice for most illicit activity,” he said.


Cybersecurity research firm Cybersecurity Ventures estimates cybercrime losses through the traditional finance system around the world will reach $10.5 trillion annually by 2025. Cybercrime is often untraceable, and victims rarely get their money back.


In contrast, Adams says that while Bitcoin transactions are pseudonymous, they are not entirely anonymous, and with sophisticated tools and techniques, law enforcement and other online sleuths can track funds stolen by criminals.


In early May, an investor lost $71 million worth of Wrapped Bitcoin (WBTC) to a wallet-poisoning scam. Cybersecurity firms and online sleuths easily tracked the alleged thief’s online movements.


By May 12, the funds were returned, and soon after, on-chain security firm SlowMist published an analysis of the hacker’s potential Hong Kong-based IP addresses. The firm has suggested that the malicious actor intended to steal the funds but had a change of heart after getting attention from investigators.


Adams believes that while both currencies have their drawbacks, Bitcoin’s inherent transparency, immutability and potential for positive social impact make it a promising contender for an alternative global currency.


Fiat often receives criticism because it can lead to economic inequality through hyperinflation. In the 2000s, Zimbabwe’s central bank began to print money at a staggering pace, resulting in hyperinflation, during which the currency lost 99.9% of its value.


Critics argue that a currency tied to gold would be more stable than fiat money because its supply is limited. According to Bitcoin creator Satoshi Nakamoto’s white paper, only 21 million are available, which advocates say makes the digital currency a better alternative to fiat.


However, Adams says rather than trying to eliminate Bitcoin or fiat, a more reasonable solution is a balanced approach that allows for the coexistence of both.


Related:Boomers hold the key to wealth, even in cryptocurrency


“Although there are ethical worries and issues with the fiat system, it still provides governments with valuable monetary policy levers which, when used appropriately, provide significant benefits for a country and their population,” he said.“Ultimately, it is a hard balancing act between providing people and governments with the freedom and autonomy to manage their own finances when a currency will always inherently lean one way; in other words, monetary freedom comes at the expense of government control.”Currency is not the issue, it’s the people


Matteo Greco, a research analyst at digital asset firm Fineqia, told Cointelegraph that individual currencies are not the issue; the people who misuse them are the problem.


“It’s challenging to determine what is inherently more or less ethical since the ethical use of a tool depends on the individuals behind it,” he said.“Both fiat currencies and Bitcoin can be used for illicit activities if the holders choose to do so. Anything can be used unethically; it depends on its application.”


Greco says this point is perfectly illustrated by Bitcoin miners sourcing electricity used for mining from renewable energy to lessen ethical concerns and possible negative environmental impacts.


Bitcoin mining, which involves computer hardware solving complex mathematical problems and verifying transactions on the blockchain network, consumes a lot of electricity.


According to one analyst, United States Bitcoin miners alone spent $2.7 billion on electricity in the first few months of 2024, sometimes over $20 million a day.


“For skeptics, any energy consumed by Bitcoin mining is seen as wasteful, but the same argument could apply to other sectors like social media, which also consume vast amounts of energy,” Greco said. 


“Objectively, we can assess how much of the network uses renewable energy and its commitment to improving this metric. The Bitcoin network leads in this area, with miners seeking cheaper, renewable energy to enhance profitability,” he added.


Earlier in 2024, data from the Bitcoin ESG Forecast revealed that the use of sustainable energy in Bitcoin mining increased to a new all-time high of 54.5%, with sustainable mining rising by 3.6% throughout 2023.


Related:Bitcoin mining is becoming more environmentally friendly


Overall, Greco says that the concept of ethics is highly dependent on perspective, and the “distinction between ethical and unethical is complex and subjective most of the time.”Technology like Bitcoin is neutral


Speaking to Cointelegraph, Caroline Bowler, CEO of Australian crypto exchange BTC Markets, said currencies are inherently “neutral technologies” that are neither “good nor bad.”


“It’s the moral compass of the individuals and institutions behind them that determines their ethical standing,” she said.


According to Bowler, fiat currency faces significant ethical issues, but “these stem from the actions of those who control and manipulate it.”


“Central banks can print money at will, leading to inflation that disproportionately affects the economically vulnerable,” she said.“The centralized nature of fiat systems also allows for corruption and misuse of funds on a large scale.”


However, Bowler says both Bitcoin and fiat currencies have the potential to be used ethically or unethically, depending on the actors behind them.


Related:The complicated relationship of ethics in Web3


A prime example is Bernie Madoff, who masterminded the largest known fiat Ponzi scheme in history, estimated to be worth $64.8 billion. He was eventually sentenced to 150 years in prison.


In the modern era, former FTX CEO Sam Bankman-Fried — who has often been compared to Madoff — was accused of misdeeds that cost customers over $8 billion. He was eventually sentenced to 25 years in prison. 


“It’s crucial to focus on fostering a culture of appropriate behavior within the financial system,” Bowler said.


“This includes promoting transparency, accountability and responsibility among individuals, institutions and governments,” she added.


Ultimately, she says the concept of an “ethical currency” is more about the appropriate behavior of those using the currency rather than the mechanism itself.


Bowler thinks that Bitcoin, with its decentralized and transparent nature, offers a unique opportunity to drive these values forward. However, it’s not a silver bullet and must be used responsibly to realize its potential.


“By holding ourselves and our institutions to a higher moral standard, we can create a financial system that truly serves the needs of all people, whether it operates on Bitcoin, fiat money or a combination of both,” she said.“The future of finance should be guided by the ethical principles of its users, not just the technology that underpins it.”Safeguards are a critical factor 


Sergey Sheleg, chief product officer of the Web3 social platform Nicegram, thinks it’s a waste of time labeling fiat and Bitcoin “with ethical clichés as there are numerous arguments on both sides.”


Speaking to Cointelegraph, Sheleg said he thinks a currency’s ethics depend on the measures and safeguards implemented by the platforms and institutions that manage it.


“For instance, Bitcoin’s decentralized nature offers transparency and can prevent fraud, but it also presents challenges in terms of regulation and oversight,” he said.“On the other hand, fiat currencies are controlled by central authorities, which can enforce Anti-Money Laundering measures but are also susceptible to misuse.”


According to Sheleg, a “truly ethical currency” would need to minimize harm and maximize benefits for society, and this is more about the policies and practices surrounding the currency rather than the currency itself.


Related:CBDCs: User privacy problem or currency of the future?


“As of now, no currency can be deemed entirely ethical, as they all carry inherent trade-offs,” he said. “We live in a time of abundant opportunities and tools to realize these opportunities. We should not compare who has a higher level of ethics, whatever that means, but create mechanisms and products that improve the world, utilizing the full power of both digital and fiat markets.”


Sheleg says the goal should be to “leverage the strengths of both types of currencies” and build a more equitable, efficient financial ecosystem that is resilient, transparent and beneficial for all.# Bitcoin# Payments# Adoption# Fiat Money# Cybercrime# Crimes# Future of Money# Money LaunderingAdd reaction