A recent UN working paper seeks to address the unanswered question – whether Bitcoin can be harnessed to empower marginalized communities and build new means of solidarity-based finance.
Authored by Brett Scott, the paper, “How Can Cryptocurrency and Blockchain Technology Play a Role in Building Social and Solidarity Finance?” considers the potential of bitcoin to be used as a tool of financial inclusion, looks at the attempts to design new cryptocurrencies based on explicitly cooperative and social justice principles and lastly, considers the emergent wave of “blockchain 2.0” innovation.
Given the current scenario, Scott describes bitcoin as a ‘digital token’ that can be moved between parties, which has market value in terms of major national and is sporadically used—although often in small amounts—in exchange for real world goods and services.
He noted that while bitcoin initially rose to prominence in advanced industrial nations like the US, several instances have emerged that suggest why it may be empowering for people in less developed countries:
- Low-cost international remittances: While local merchants in poorer countries may struggle to access international payments systems to sell their goods abroad, getting a Bitcoin address might enable them to sell products in exchange for Bitcoin tokens, thereby avoiding traditional e-commerce systems (which often involve having to set up a merchant account with a formal bank).
- A quasi-bank account for the “unbanked”: Scott says that Bitcoin can be considered as a type of decentralized bank in itself. A person just needs a computer or a mobile phone to download a Bitcoin wallet, thereby obtaining a public key that represents their account on the global system. “In the context of a country with poor banking infrastructure and reliance on cash, such a technology could—hypothetically—be a safer way to hold money, and a convenient way to transfer money in everyday transactions.”
- Blockchain technology that underpins Bitcoin—subsequently providing the basis for a richer set of financial services. Scott points out the irony in the implementation of blockchain technology – he says that while the technology is potentially most useful in situations where there are weak institutions and parties who cannot easily trust each other—for example, in a setting like Afghanistan, with low state capacity and low trust amidst conflict—such countries are also often in the weakest position to effectively implement such technology.
Although the “technological novelty of blockchain systems is authentically exciting”, he points out an essay Visions of a Techno-Leviathan, that suggests that “people need to be protected from themselves by deferring responsibility to “trustless” technological platforms that will enforce contract-based relationships between atomistic individuals in an escape from community.”
Concluding his report, Scott says that the bitcoin and blockchain technology is still new, but there are potentially empowering uses in certain contexts.
“While the community around this technology is enthusiastic and experimental, it is still prone towards the elitist, tech-centric outlook of disruptive technology start-up culture”, he said. “A key role for SSF [social and solidarity finance] practitioners then, is to consider how blockchain technology could be implemented with sensitivity to the real struggles people face in implementing technology within diverse cultural and political contexts. One blockchain does not fit all.”