April 6th, 2022 | Edition 9
Good Morning,
We’ve been thinking a lot about change this week, and it appears that we’re not alone! We certainly got a kick out of Wealthsimple’s crypto ad that played during Grammy intermissions, a comedic representation of those resistant to change… in this case, the wheel (watch it here).
Following that, this week we take a closer look at the social impact of cryptocurrency and fill out your weekly reads list with some incredible articles (and podcasts, although we’re not changing the title to weekly listens just yet). If you’re finding that one email a week is not enough time to spend with your favourite community thinktank, consider joining our LinkedIn group here.
Thanks for reading, and see you next week.
– Lauren Carson
Latest In Systems Change
FORECAST | ACTIONABLE INSIGHT
ESG & Crypto: A level playing field, or a growing gap?
Cryptocurrency has the capacity to erase financial borders. Lines previously guarded by governments, banks, large corporations, can now be crossed. There are over 3 billion people around the world who are unbanked; they now have a democratic, digital currency available that is not under “centralized control”.
Last week, we discussed the environmental impact of cryptocurrency. Read the full article here. This week, let’s continue down the ESG alphabet and analyze the social implications more thoroughly. As we continue throughout this series, we must not forget the interconnectedness of these systems; while environment, social, and governance are convenient lines to color inside, it would be irresponsible to consider them entirely separate.
Social responsibility has many meanings; from community relations and human rights, to inclusion, and political ties. Unfortunately, we do not have time to cover everything (if you do have the time we recommend reading Crypto Theses for 2022 by Messari). Corporate social responsibility means that corporations are consciously aware of the impact they’re having on society, and adopt practices that encourage periodic review and accountability. So, is it socially responsibly for corporations to invest in cryptocurrency and even accept it as a valid form of payment?
The ability to instantaneously send funds across borders means “direct access to funding for charities”, faster response rates and the accessibility of micro-donations makes donating less tedious and more realistic. With the minimized transactional costs that crypto can provide, donations also have the potential to be more impactful to the intended beneficiaries. The administrative ease affects “Emergency aid, welfare, fines, and many other financial areas”. Due to these abilities, Bitcoin has been suggested as a way to send remittances overseas, supporters cite its “borderless nature”.
However, Bitcoin transactions are becoming increasingly more expensive, sometimes even more so than traditional banks; it’s unpredictable and has non-transparent tendencies that concern governments with respect to money laundering. There are other cryptocurrencies such as Ripple that are targeting this market of opportunity, Ripple costs less than Bitcoin, requires less energy to mine, and transactions are confirmed very quickly. For corporations, or even non-profits, sending and receiving donations has the potential to be more impactful via certain cryptocurrencies. However, this impact can sometimes be tricky to measure given the inherently untrackable nature of blockchain.
The freedom to control one’s money is an obvious plus for owning cryptocurrency. Many minority Americans such as Black and Hispanic community members have adopted crypto as a “central part of their financial lives” as there is increasingly less trust in centralized institutions that have maintained wealth disparities in America by making it harder for African Americans to get home loans, and secure other financial assets. For the 4.2 billion people around the world that “live under authoritarian regimes that use money as a tool for surveillance and state control”, crypto is a way to maintain privacy and freedom. Bitcoin is helping people escape “tyranny and currency collapse” when a common tactic governments use to silence ‘nuisances’ is locking bank accounts and freezing assets. That being said, access to crypto still requires internet, funds to purchase crypto, and general financial literacy; items that are not inherent to the vulnerable communities crypto claims to empower. Read this article, from Reason, to learn more about how Bitcoin is protecting human rights around the world.
Bitcoin users can choose to accept or reject updates to features, thus maintaining their ‘freedom’, while currencies like Etherium rely on majority rule. Crypto’s mission of ‘financial freedom’ was put to the test when Russia began its invasion of Ukraine, and it continues to demonstrate that this value proposition was not just empty words as blockchain assets continue to arrive in Ukraine. However, this “freedom to transact” is not always a positive as has been demonstrated on the opposing side of the Ukraine war and during the ‘freedom convoy’ in Canada. The ability to freeze transactions is a weapon that can be used by allies and foes alike, decentralized systems are similar shields.
Several quotes emerged over the course of my research as overwhelming pro crypto when considering social impacts; One author states that “Enough people believe in bitcoin’s value as an investment in new social and governance experiments that its S and G arguably offset even the critic’s worst case E scenarios. Bitcoin is inherently political.” Another, that “Whether they know it or not, people who buy bitcoin are strengthening a tool for protecting human rights”. Of course, Bitcoin is not the only cryptocurrency (there are thousands), and there is always space for a new favorite.
So, what does this mean for the C-suite? First, investing in crypto, or accepting it as payment remains risky. While about 15,000 businesses around the world accept cryptocurrency as a form of payment, many are still experimenting and trialing different strategies. Accepting crypto as a form of payment opens businesses up to difficult issues like transaction disputes and, of course, Bitcoin could theoretically fall to zero at any time. However, this article has demonstrated the potential for cryptocurrency to truly empower and involve communities that have not had access to such a democratic banking system. Socially, accepting crypto as a valid form of payment can open business up to more consumers, markets, and perspectives.
If, as stated above, it is true that investing in crypto is inherently political, corporations should be aware of the impact they are having on society when investing in this currency.
The systemCHANGR take: Although the title of this series is ‘ESG and Crypto’, you may have noticed the heavy focus on Bitcoin. There are thousands of other cryptocurrencies that exist for a variety of reasons and to fill a variety of gaps. However, Bitcoin is still by far the most popular cryptocurrency and thus seems to have the largest ESG implications around the world. Perhaps it would be worth investigating further the more unusual and niche cryptocurrencies that exist with unique ESG value propositions. Like many of our greatest tools, Bitcoin is a double edged sword; it has the potential to empower marginalized communities, encourage charitable giving around the world, and let people have control of their assets. That being said, the lack of transparency can make impact hard to track, volatile markets can drain bank accounts, and the freedom that exists, exists for all. Cryptocurrency is transformative, it cannot be argued, but with the potential to either create a more equal playing field, or widen the wealth gap, it will be fascinating to watch history unfold.
WEEKLY READS
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