The drawbacks of conventional online payment systems
In retaliation, the non-profit BYSOL, based in Belgium, began offering financial assistance to the protesters. However, as the demonstrations were declared illegal, conventional financial intermediaries adhered to the law and froze the accounts of protestors, seizing their funds. Electronic transactions were scrutinized, and cash was confiscated at borders. BYSOL resorted to Bitcoin, enabling protestors to receive assistance in personal wallets and conduct small exchanges with locals, effectively circumventing the pervasive surveillance imposed by the state.
Valid reasons exist for governments to oversee financial transactions and impose restrictions on certain activities. However, there has been an alarming trend of governments abusing their control over intermediaries to suppress political dissent. This highlights a significant flaw in regulation through intermediated finance.
Nonetheless, despite its advantages, cash is ineffective in the online space. To send money over the internet, we increasingly depend on intermediaries to facilitate transactions. We deposit our money in a bank, instruct that bank to transfer funds to a service like PayPal, which then sends the money to another user’s PayPal account, requiring that person to withdraw from PayPal to a bank account before they can cash out.
Every stage of this procedure is meticulously documented by each entity involved and ultimately reported to governmental authorities. We must trust these companies to execute our transactions, a leap of faith that history indicates we shouldn’t take lightly.
This concern could even manifest in the U.S. The recent repeal of Roe v. Wade threatens abortion access. If funding for abortion services becomes prohibited, payment processors might feel obligated to comply with legal requirements or provide evidence to law enforcement. Various abortion pill websites utilize services like PayPal and Stripe for transactions; if these services are discontinued, cryptocurrency could emerge as a vital alternative. Similar financial threats to access are present for numerous contentious issues. Controlling individuals is challenging, but managing intermediaries is relatively straightforward.
Cryptocurrency as a safeguard against financial monitoring
Cash is nearly an ideal payment method. It doesn’t require an account. It’s indifferent to your identity or the items being purchased. It acts as a bearer instrument. I give you a dollar; you now possess the dollar, and I no longer do. The exchange is instantaneous, with no interference possible. There’s no need to trust an intermediary to ensure the dollar reaches you. Most importantly, it’s confidential. There is absolutely no record of that exchange. Its privacy is so profound that a common joke in the cryptocurrency community suggests: if cash were introduced today, it would be outlawed.
When protests erupted in Belarus following a fraudulent election, the government responded swiftly, including implementing financial penalties. Protesters faced significant fines, and there was pressure on employers to dismiss dissenting workers.
In Russia, opposition to Putin was categorized as extremist, rendering donations illegal. Financial intermediaries had no real choice but to comply with the law. These entities had effectively become instruments for policing political engagement. Alexei Navalny’s Anti-Corruption Foundation turned to cryptocurrency, bolstered by privacy tools such as Wasabi Wallet, to sustain its operations. Russian citizens could continue financially supporting opposition efforts against Putin thanks to this potent new option.
Why would a company like PayPal risk its reputation by processing payments for sectors deemed unpalatable by some, even if they are legal? Numerous instances exist of adult creators being removed from platforms, or marijuana businesses being ousted, or dissenting political voices being silenced. Ultimately, it’s often simpler for these companies to expel individuals to hone in on their primary business. If every firm makes the same assessment, these sectors are effectively eradicated even after adhering to the rules.
Conversely, cash, whether physical or cryptocurrency, serve as neutral systems immune to the caprices of both authoritarian figures and public outrage. Cryptocurrencies function as cash for the online world. No account is necessary; just a computer and internet connectivity. They cannot form an opinion regarding your activities. They do not surveil your actions. Additionally, no one can obstruct your capacity to transact with them. They are crucial instruments for preserving our existence as free individuals in the digital age and act as a counterbalance to the authoritarian tendencies facilitated by a centrally intermediated internet.
Beyond direct legal control over intermediaries, another critical flaw within the intermediated financial system is the private nature of these companies, which have their own agendas and values. Many of them operate as publicly traded entities, making them vulnerable to shifts in public sentiment.
Sadly, cash usage is declining as more individuals opt for the convenience of platforms like Venmo. Even in-person transactions, such as buying coffee, that once involved cash are now mediated—recorded, reported, and processed according to the regulations imposed by corporations and governments.
In Myanmar, the Junta enforced stringent Know Your Customer regulations and restricted the use of cash, forcing all economic activities into a monitored system susceptible to arbitrary account freezes. In Iran, proposals have emerged to automatically deduct fines from the bank accounts of women who violate hijab mandates.
The concentration of commerce through a limited number of intermediaries creates points of access that allow authoritarian regimes to exert pressure on what citizens can and cannot do. This threat might appear distant for those of us in stable democracies, yet the reality is that governments control financial infrastructures, and not all of them champion free expression and association.
Source: bitcoinmagazine.com
Bitcoin and other cryptocurrencies present a viable alternative. They function in ways much closer to cash. They are bearer instruments that can be utilized privately without requiring an account. They represent cash for the online world and diminish the authority of intermediaries over our financial affairs.
