The crypto bros — and U.S. President Donald Trump — may soon get their way.
Trump called on the U.S. Senate to pass the Clarity Act to honour the recently deceased Sen. Lindsey Graham.
The Clarity Act would legalize and create formal regulations for most cryptocurrencies. If it passes, it will affect investors the world over and fulfil Trump’s goal of making America the crypto capital of the world.
This would further legitimate cryptocurrencies, fundamentally reshaping the world beyond finances.
Bitcoin is the most well-known and valuable of the cryptocurrencies and the most anti-social “social network” in the world. It has been around since 2009 and has at the heart of its mythology a mysterious founder, ‘Satoshi Nakamoto.’
What makes bitcoin notable is that it started an entire genre of digital value on the idea that algorithms are more trustworthy than people.
Through an electronic ledger maintained by a network of computer nodes — called blockchain — Bitcoin provides a “trustless” alternative to traditional financial systems, enabling people to buy, sell and transfer digital value without using typical intermediaries like banks to ensure the validity of transactions.
Societies and countries tend to function on a fundamental trust. A lack of trust is often seen as a problem for interpersonal and international relations alike. So, while the promise of a “trustless” way to do business, interact and exchange may be enticing, we should proceed with caution and consider the implications of how such anti-social social tools affect more than just our financial systems.
Bitcoin and other cryptocurrencies are revolutionizing the way we think about value, the safety of transactions and who controls access to money. Nowhere is this more apparent than in our economic and political systems.
Until cryptocurrencies appeared, state-issued currencies were the only system used to create money and assess value in modern societies. States made, certified and distributed money, thereby ensuring its value. Cryptocurrencies turn these norms upside down — taking sole control over value out of the hands of governments and banks.
While financial institutions were initially skeptical of cryptocurrencies — dismissing them as a fleeting novelty or a fraud — resistance is fading.
Many banks now give clients access to cryptocurrencies. Some even issue their own cryptocurrency. Investment firms are increasingly including them in their financial offerings.
Although many governments remain concerned that cryptocurrencies pose a threat to their monetary sovereignty or is a tool for criminal activity, an increasing number of nations are embracing crypto.
The U.S., China, United Kingdom, India, Finland and Ukraine all hold substantial crypto assets The U.S. is the largest state owner of bitcoin, with approximately 200,000 BTC (bitcoin) seized from criminal raids or civil proceeding seizures.
A few nations have even experimented with cryptocurrencies as legal tender, while others look to digitize their own national currencies.
But what happens if we continue on the digitization of currency unabated? If governments, bankers and investors are all buying into the promise of blockchain, who is looking out for the social and political consequences of crypto for the rest of us?
Cryptocurrencies also come with a heavy cost to the environment.
Blockchain is by design resource heavy. To ensure the trustworthiness of blockchain, cryptocurrency code requires vast fields of computers around the globe to race to solve complex math puzzles — gobbling up massive amounts of energy and water, creating significant waste.
Trustlessness is also costly.
The collapse of cryptoexchange FTX and the continued scrutiny of Binance in illegal activities should give us pause. The lack of government guarantees that individuals have with their cryptocurrency holdings are lessons that many an investor who have lost their keys have discovered.
The world of blockchain might hold promise for many applications. But when we consider how we might regulate or leverage cryptocurrencies, we need to account for their social and political consequences as well.
