A Defense of Keeping Politics Out of Crypto
Brian Armstrong, the CEO of the leading American crypto exchange, caused a stir recently when he announced a policy of keeping Conibase out of political and social activism to better focus on its core mission. He backed up the decision with a generous buyout for any employees who disagreed. In his own words:
Many companies never stand the test of time, because they decide to dabble in unrelated efforts, and distract and divide their workforce in the process. Paradoxically, by being laser focused on our mission, we will likely have an even greater impact on the world, through our products and growing customer base.”
One should read the entire post before reacting, as some of the people who have responded negatively clearly have not. There’s more to his argument than “we are just here to make money,” and the online pundits who insist on reducing it to some caricature of capitalism just validate the overall argument.
Armstrong says that he doesn’t want the pursuit of outside causes to distract Coinbase from the core work of building an open financial system that provides greater access to everyone, because executing on that mission will have a greater impact than activism. I support this approach and hope that more crypto companies adopt it — leaving the tweeting, campaigning, protesting and every other kind of vocal activism to others.
My reasoning starts with that famous proverb that Mohandas Gandhi — the man often credited for it — never said: to be the change we want to see in the world. It’s a powerful saying, regardless of who came up with it, but lacking in practical instructions. Thankfully, what Gandhi did say was more nuanced.
“All the tendencies present in the outer world are to be found in the world of our body. If we could change ourselves, the tendencies in the world would also change. As a man changes his own nature, so does the attitude of the world change towards him. This is the divine mystery supreme. A wonderful thing it is and the source of our happiness. We need not wait to see what others do.””
That last sentence makes all of the difference. There’s a false belief in today’s discourse that yelling about a problem, or shaming those considered responsible for it, go a long way toward solving it. They don’t. Outrage is the state of being upset over something and demanding somebody else fix it. Real change takes individual action — but not, as the Mahatma believed — the kind that impacts others, but rather the kind that impacts the self. A million people tweeting about the need to end racism wouldn’t change much. Those same people taking the time (and summoning the humility) needed to confront their own biases — the kind that all of us, myself included, suffer from — would make a genuine impact.
But that’s doing, and doing is hard. Retweeting is easier. So everyone gets caught up in a recursive loop of posting and protesting, then being upset that nothing has changed, then getting louder. Sides are picked, battle lines are drawn, and little is accomplished. Doing is more effective, but easily distracted by the need for validation. A company deciding to have more minorities in executive positions is great. That same company issuing multiple press releases before the first promotion is less great.
Which brings us back to crypto. One of the things that shocked me about Bitcoin when I first learned about it was its sheer openness. Anyone could do anything, from owning the coins to writing the code to participating in mining to building the supporting infrastructure (as Coinbase has). If you wanted to build the next great crypto wallet, all you had to do was build it. It didn’t matter if you were young or old, black or white, gay or straight, American or Iranian, an experienced coder or a total noob. The only thing that mattered to the rest of the community was the usefulness of your product, which you were free to build however you thought best.
This was a stark contrast to the traditional financial system, where nothing could be done until you were given permission by a gatekeeper, and the first thing the gatekeeper would ask you to do was to fill out a form, and that form asked you to disclose your name, age and address — information which could easily be used (or misused) to make conclusions about your gender, nationality and race.
Decentralization is often portrayed by the skeptics as a negative, an open invitation to the world’s anarchists or criminals to cause mischief. But decentralized also means “doesn’t discriminate.” When there is nobody in charge, there is no ability to oppress or exercise bias. Our existing financial system on the other hand is built on bias.
Case in point KYC, or the almost universal requirement for traditional financial services providers to “know their client.” Such requirements are designed with good intent, to cut down on financial crime and prevent the use of the banking system for illicit activity. But they are costly, and that cost is borne disproportionately by the underprivileged. Even when executed fairly, KYC requirements mean that poor people who don’t have proper ID, migrants who don’t have a fixed address or undocumented workers trying to stay under the radar can’t get a bank account. That is the best case scenario. The worse case scenario is the personal information gathered for these requirements are used to practice racism, sexism and every other kind of discrimination.
The blockchain doesn’t discriminate, because the blockchain doesn’t know, and better yet, doesn’t give a damn. All anyone needs to access bitcoins is free software — making the bitcoin platform the first digital platform that can’t pick favorites. As far as the protocol is concerned, a billionaire in America gets the same amount of access as a farmer in Thailand. Not because there are laws against discrimination or because miners have undergone sensitivity training, but because both users look exactly the same to every other participant.
A more abstract, but arguably more insidious form of discrimination within the legacy financial system is the distribution of new money. In crypto, new coins are generated algorithmically and distributed to those who contribute the most, be they miners, coders or users. It doesn’t matter who they are, where they live or which political candidate they’ve contributed to. The fiat domain works on the opposite principle. Newly minted dollars, euros or pounds usually go to those who deserve it least, like “too big to fail” banks in the last economic crisis or any corporation that has access to public capital markets in this one.
Central banks such as the ECB and Federal Reserve are now using printed money to subsidize the borrowing of large corporations, including that of mega tech companies like Apple and Microsoft, a corporate subsidy for highly profitable companies who have actually benefited from the pandemic. Since they don’t need the money, these companies will just use the subsidy to drive up their stocks via share buybacks. According to the Fed’s own data, stock ownership in the U.S. skews heavily towards the old, the white and the rich. That makes Fed programs that benefit the market (which is practically all of them) a form of systemic discrimination, executed to the tune of trillions of dollars. No wonder the current chairman has started giving speeches on the need to tackle racism. A little bit of saying to whitewash all of that tragic doing.
All of these issues are amplified in developing countries where access to basic financial services are even more limited and government institutions are a lot more corrupt. But there is hope, because the same meritocratic and open approach to financial services that was pioneered by Bitcoin is now being applied to everything from fiat currencies to banking. Argentinians fed up with endless government defaults and devaluations could now save in a dollar-denominated stablecoin called Dai, and expats who are often can’t use banks will soon have much better remittance options, including Libra.
Further out on the horizon are protocols for borrowing, lending and investing. Not just in crypto, but tokenized versions of every other asset class, from gold to real estate to collectible art. Such products are not available to the vast majority of people today, due to a tragic mix of poor infrastructure and bad policy. This lack of access has been a prime contributor to the explosion in the wealth gap over the past decade, and when combined with the other types of discrimination inherent to our financial system, form a de facto conspiracy by economic elites to make sure nobody else catches up to them. Put differently, the New York Stock Exchange, Sotheby’s and the SEC are not about to make investing a universal right, but the Ethereum blockchain just might.
I don’t mean to exaggerate the benefits as they stand today. Bitcoin is still too small to make a difference and stablecoins and other forms of tokens are too new to make a dent. But they represent a new way of doing things, one that is superior along the axis that society increasingly cares about, such as equal treatment and universal access. Bringing that vision to the masses will take a lot more doing, and some of it will have to be done by companies like Coinbase. So Brian Armstrong was correct. The company can have a much greater impact on social justice by focusing on its core mission. As can everyone else in crypto.