Here’s a clear example:
“For poorer countries with limited state capacity, crypto is a growing problem. Citizens don’t need to be computer whizzes to circumvent the authorities. They can just access one of several simple “off-chain” exchanges. Although cryptocurrency transactions intermediated by a third party are in principle traceable, the exchanges are based in advanced economies. In practice, this makes the information virtually inaccessible to poor-country authorities under most circumstances.”
Could this man be any more condescending? Also, what does this Harvard professor mean by “several simple “off-chain” exchanges”? An “off-chain transaction” refers to one that isn’t registered on the blockchain, like giving someone the private keys to a wallet or a redeemable coupon instead of transferring funds. What exchange offers that service? Not a one. They can circumvent authorities, however. That’s true.
An example is Roya Mahboob, who in 2013 funded a company that “was a female-owned, fully female-operated software company: a radical pioneer in a place like Afghanistan. Because her employees had trouble getting paid in cash (male relatives would seize it), and had trouble opening bank accounts, she paid them in Bitcoin.” Also, “One of Roya’s employees escaped Afghanistan out of political risk, and ended up fleeing through Iran and Turkey eventually to Europe, losing everything except for her Bitcoin.”
2/ Her company was a female-owned, fully female-operated software company: a radical pioneer in a place like Afghanistan.
Because her employees had trouble getting paid in cash (male relatives would seize it), and had trouble opening bank accounts, she paid them in Bitcoin
The crazy thing is that the Harvard Professor knows about the positive side of cryptocurrencies. He just doesn’t care.
“But isn’t this just crypto fulfilling its promise of helping citizens bypass corrupt, inefficient, and untrustworthy governments? Maybe, but, just like $100 bills, cryptocurrencies in the developing world are as likely to be used by malign actors as by ordinary citizens.”
This might sound crazy because $100 bills are as legal as it gets. The thing is, this man wants to ban cash too. More on that later. First, let’s stay on the Harvard professor denying the benefits of bitcoin because of a minor problem.
“For example, Venezuela is a major player in crypto markets, partly because expatriates use them to send money back and forth without it being seized by the country’s corrupt regime. But crypto is also surely used by the Venezuelan military in its drug-smuggling operations, not to mention by wealthy, politically connected individuals subject to financial sanctions. Given that the United States currently maintains financial sanctions on more than a dozen countries, hundreds of entities, and thousands of individuals, crypto is a natural refuge.”
Are governments going to stop drug smuggling because of a little payment method detail? No, they aren’t. Governmental drug-smuggling operations existed way before cryptocurrencies and would survive any kind of ban. They would figure out a way. What doesn’t exist way before is a way for expatriates “to send money back and forth without it being seized by the country’s corrupt regime.” Plus, the Venezuelan expatriates are in the millions nowadays, but “individuals subject to financial sanctions” are like a dozen people.
The Harvard professor can’t stop digging his own grave, and sets up his suggestions by making the wildest and most non-sensical comparison ever written:
“The biggest investors in crypto may be in advanced economies, but the uses – and harms – have so far been mainly in emerging markets and developing economies. One might even argue that investing in some advanced-economy crypto vehicles is in a sense no different from investing in conflict diamonds.”
Blood diamonds? Really? No further comments on that nonsense.
What does Kenneth Rogoff proposes that “advanced-economy governments” do to control cryptocurrencies:
“They will be forced to institute a broad-based ban on digital currencies that do not permit users’ identities to be easily traced (unless, that is, technological advances ultimately strip away all vestiges of anonymity, in which case cryptocurrencies’ prices will collapse on their own)”
Well, for a cryptocurrency to “permit users’ identities to be easily traced,” it would have to be centralized. And at that point, why bother using a blockchain? Those things are expensive and impractical. And their only real use is facilitating decentralization. And on the second point, there are technological forces pulling in the other direction as well. Chances are privacy in cryptocurrencies will increase in the following years. Because, people deserve privacy, you know? There’s nothing wrong with privacy. As a matter of fact, it’s a human right.
The Harvard professor continues:
“Such a step would sharply undercut today’s cryptocurrency prices by reducing liquidity. Of course, restrictions will be more effective the more countries apply them, but universal implementation is not required for significant local impact.”
Kenneth Rogoff has a point here.
They can surely ban centralized cryptocurrencies. We’re not so sure about bitcoin. The Harvard professor seems convinced his extremely hardline approach is normal and would work.
“As China has demonstrated, it is relatively easy to shutter the crypto exchanges that the vast majority of people use for trading digital currencies. It is more difficult to prevent “on-chain” transactions, as the underlying individuals are harder to identify.”
Apparently, this man has not heard of decentralized exchanges. Good luck taming those. However, let’s focus on the second part. Does this man feel like it’s necessary to “prevent “on-chain” transactions”? Wow. That’s a lot. And here it comes, Kenneth Rogoff wants to ban cash as well!
“Ironically, an effective ban on twenty-first-century crypto might also require phasing out (or at least scaling back) the much older device of paper currency, because cash is by far the most convenient way for people to “on-ramp” funds into their digital wallets without being easily detected.”
Yikes! This man is an extremist of the highest order. However, he’s not as bad as his writing paints him. The Harvard professor gives the world permission to use “regulated stablecoins”:
“Just to be clear, I am not suggesting that all blockchain applications should be constrained. For example, regulated stablecoins, underpinned by a central-bank balance sheet, can still thrive, but there needs to be a straightforward legal mechanism for tracing a user’s identity if needed.”
Once again, why would you need a blockchain for the “regulated stablecoins” that this man is proposing? This Harvard professor needs to study the underlying technology before writing about cryptocurrencies ever again.