Skeptics have called blockchain and associated innovations like cryptocurrencies “solutions in search of a problem.”
And while reasonable people can agree and disagree on these fledgling technologies, one need look no further than the capital controls imposed in Argentina over the weekend to get a hunch for why neutral, transnational digital currencies that any given state can’t directly dictate have real promise.
Here’s the context. On September 1st, Argentina’s central bank enacted a series of domestic monetary restrictions that were aimed at figuratively stopping the bleeding in the nation’s ongoing currency crisis. The recent cratering of the Argentine peso (ARS) has threatened the central bank’s currency reserves and pushed the country’s government to the brink of default.
This is crazy. ICYMI: Argentina was technically in default for 24hrs ????
— Camila Russo (@CamiRusso) August 30, 2019
Specifically, the fresh capital controls are an emergency attempt to stop the peso’s freefall. Among other things, the rules mandate that Argentine citizens can’t buy more than $10,000 U.S. dollars each month. That’s to stop widespread flight to an obviously stronger currency, as popular confidence in the peso has acutely tanked.
With that said, Argentinians are being cornered into an at-risk currency for now, which could end up wrecking peoples’ earnings depending on how things unfold in the South American nation.
Argentina is right now under the looming threat of yet another capital restriction crisis (ban of free currency exchange).
Argentinians using Bitcoin/DAI not affected. 😉
— ⚡????????Eduardo????????⚡ (@Codiox) August 30, 2019
Of course, the entire situation is complicated and multi-faceted, and there are pros and cons for any course of action that a government could take in such a crisis. It’s not that cryptocurrency is some catch-all solution here, either. But the new capital controls highlight where crypto shines: in being censorship resistant and permissionless to use.
The Promise of Neutral Money
One can safely assume there are many people around the world that would be inclined to believe a government shouldn’t be able to dictate when a private citizen can send or receive money, at least in the majority of cases beyond government taxation and criminal financing.
Yet the latest capital controls in Argentina are just the latest example showing how — for better or for worse — governments can and will issue such dictations to the acute detriment of citizens.
learn bitcoin now. https://t.co/UKiSEibQIx
— santi (@santisiri) September 1, 2019
This is where a wider discussion involving freedom, human rights, and the nature of money comes in.
Again, reasonable people can agree or disagree on an endless number of things in this discussion, but it’s clear that neutral payment systems like top public cryptocurrencies offer a fledgling avenue for global citizens to “drop out” to payment rails that greatly disintermediate traditional institutions that can censor and enforce permissions at will.
In recent weeks, Human Rights Foundation chief strategy officer Alex Gladstein has been making the case that bitcoin is exactly such a payment rail, for example. In an appearance on Laura Shin’s Unchained podcast earlier this summer, Gladstein relatedly said:
“That’s […] why something like bitcoin is important. Because, at the end of the day, it’s a neutral payment platform. No one can decide whether one person can receive money or send it. In an age of increasing surveillance, that’s going to become increasingly important.”
Making a similar case for the Ethereum stablecoin Dai has been Democracy Earth founder Santiago Siri, who hails from Argentina. In the wake of the September 1st capital controls, Siri took to Twitter to argue that the Dai was an ideal way for Argentine citizens to avoid having their earnings destroyed. Translated roughly from the Spanish, he wrote:
“I really think that the best option for those who want to have dollars, but do not want them to be confiscated by the government and want to avoid the risk of having to keep cash in a mattress is to have Dai, the best stablecoin in the market created on Ethereum.”
In other words? The people have options — options they didn’t have just one decade prior. In this sense, public blockchains like Bitcoin and Ethereum offer a new way.