Cryptocurrencies sometimes serve as a corrective that reveals weaknesses in the existing system
(Photo: Reuters)
Frankfurt For years, Afghan entrepreneur Roya Mahboob paid her employees in bitcoin because a large proportion of women in Afghanistan do not have bank accounts. When the Taliban took power, many of their former employees were able to use their crypto savings to leave the country.
It is stories like these that show the utility of cryptocurrencies. And there are many of them – from countries with unstable financial systems, high inflation or a political leadership that oppresses parts of the population. There is, for example, the opposition leader Alexei Navalny, who is imprisoned in Russia and whose anti-corruption organization called in the summer for donations to be made in cryptocurrencies from now on after the organization was classified as extremist.
These stories show that people who are satisfied with the traditional financial system, who experience the world as reasonably stable and who perceive western financial institutions as reliable do not have the authority to interpret who needs cryptocurrencies.
Because as long as there is a need to send values digitally without involving large corporations or sharing information with governments, there will be cryptocurrencies. Critics like my colleague Frank Wiebe, who recently expressed the opinion in the Handelsblatt that nobody needs cryptocurrencies, should not underestimate this need – but see it as an invitation to critically examine the weaknesses of the traditional system.
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Because cryptocurrencies now fulfill another important function: as a corrective that reveals weaknesses in the existing system. Developers and users raise important questions: What function should digital values have in our society? Who has the power in the current system – and who should have it? What can a world without banks look like? How can intellectual property and copyrights be better protected using developments such as NFTs? Anyone who dismisses this as unnecessary is withdrawing from the discussion.
Cryptocurrencies are forcing central banks to innovate more
Yet this is inevitable. The crypto world is already exerting tremendous pressure to innovate on the central banks of this world and is forcing them to think more digitally in a digital age.
Of course, central banks must continue to exist. But instruments can also be important that limit their absolute claim to power in money matters. Cryptocurrencies make it possible to express criticism of monetary policy in digital form even when no elections are taking place.
Without a doubt, cryptocurrencies also bring problems. In many cases, volatility makes it difficult to use as an alternative store of value. Access is restricted to those with internet access and internet enabled devices. Those who cannot read and write will also remain dependent in use. Coins based on proof-of-work blockchains harm the environment. There are also distribution issues, strong power imbalances and a gender gap in the industry within the crypto world, which affects the development of new instruments and smart contracts.
In order to address the problems that cryptocurrencies bring with them, well-founded criticism and a broad debate are important – without blanket judgements.
More: What professional investors have to do with the recent Bitcoin crash