Following the financial crisis of 2008

Following the financial crisis of 2008, the public took a renewed interest in the ethics of the banking world. Not long after this period, digital or cryptocurrencies were developed and spread around mostly amongst digitally savvy communities. This small but technically astute community of developers came together to create what we understand as a distributed ledger or Blockchain in an effort to create digital currencies such as Bitcoin. Since the project’s start in 2009, Bitcoin has been the most successful digital cryptocurrency in terms of its popularity and user adoption. This innovative idea of a digital currency has lately gained a lot of traction and may likely play a major financial role in the future. Bitcoin is currently the most popular cryptocurrency, but many other alternatives exist. The ethics behind cryptocurrency is complex, and a major problem of whether this new currency will benefit society as it is more widely adopted.
Cryptocurrencies bring many new innovative solutions to the current financial situation. Bitcoin as one example, offers an unprecedented ability for confidentiality during digital transactions. In utilizing cryptocurrencies between peer to peer transactions of goods and services, neither party need ever know the other’s identity, drastically different from a cash-based transaction through a financial institution. And without the regulatory structure of a government overseeing the currency, or even a banking institution acting as a middleman for digital transactions, oversight at this point in time is scarce. The arguments for regulation and a moral rejection of digital currencies may seem sound, especially given the trial and conviction of the founder of the Silk Road online store which used bitcoins as a medium for illicit activities. Or, the blatant fraud committed by companies promoting initial coin offerings and disappearing upon receipt of funds. These cases lend tangible credence to the current evils associated with the use of digital currencies.
There are several controversies surrounding cryptocurrencies. Unlike conventional currencies, they are not pegged to a government-backed fiat dollar, meaning its value is relative and purely market or interest driven. First, they can be used to evade taxes. As they encompass qualities of security and anonymity, the result is a secure, partially or fully anonymous, and decentralized electronic medium of exchange with limited transaction fees. These features promote a potential way for people looking to hide funds from the government to do so. Furthermore, cryptocurrencies as a whole could potentially violate U.S. and the laws of governments worldwide, as it arguably competes with the U.S. dollar and other national currencies that have a legal right on the issuing of money.
Every year, online crime increases its share of the total crime being committed. The National Crime Agency (NCA) Cyber Crime Assessment 2016 report stated that cybercrime accounted for 53% of all crimes in 2015, and this trend shows no sign of slowing down. The Internet and the subsequent rapid adoption of online payments have ushered in a new dawn of transaction mechanisms such as cryptocurrencies. Blockchain based cryptocurrencies have the advantage of allowing payments with little or no transaction fees. The underground market through the use of Darknet, have been known to use cryptocurrencies as a means for conducting illegal transactions. We see organized crime syndicates increasingly move operations online, and we can expect to see cybercrime continue to develop into a highly lucrative and well-organized enterprise. An increasingly prominent aspect of these illegal enterprises is the use of cryptocurrencies in transactions around the world.
Is it ethical to steal? Surely, we’ve been taught or forcibly learned the rules of the law, but what rules govern cyberspace? With the advent of the Internet anyone with a computer or mobile device is able to instantly connect to the World Wide Web and perform any number of transactions instantaneously. Countries separated by bodies of water and land are interconnected in the digital world bringing social communities closer than ever before. The threat of ransomware is one of many concerns which raise the ethical issues of cryptocurrencies. There have been numerous cases of Hacking, utilization of code exploits, blatant fraud in terms of holding an Initial Coin Offering (ICO), amongst numerous other negative aspects which directly impact society as a whole.
One of the latest attack vectors for hackers that relies on cryptocurrencies is ransomware. This is a type of malware that holds people’s data files hostage until a payment is made. Once a PC is infected with ransomware, it encrypts all documents on the computer and any attached network drives and starts a counter that once it reaches zero removes the files. The only solution to most instances of ransomware is to pay the scammers. Recently, we have seen a dramatic rise in ransomware Denial of Service attacks using Bitcoin as the payment method. Here the hackers threaten to bring a site to its knees unless the ransom is paid. This is a new avenue and a growing threat to all users of the Internet. In an ideal world, we would like no-one to pay a ransom to the criminals. Paying the ransom not only enriches them, but also encourages them to further develop more sophisticated ransomware and target more victims. There is also no guarantee that the payment of a ransom results in the files being unlocked. For most people, payment really comes down to the value of the files at risk. If they are deemed worth the ransom then most will simply pay, as quite often the ransom is far cheaper than the cost of losing access to those files.
To date, cryptocurrencies have mostly been used to undermine security. We have a reached a pivotal moment in global society where financial transactions can take place without being traceable. Virtual currencies are now the modus operandi of trading in illicit goods or services, such as weapons or drugs. Money exists to reduce transactions costs. It is the “good” that we can easily exchange for all other goods so that we don’t have to barter. Money has to be generally acceptable, portable, divisible into smaller units, durable, limited in supply, and uniform in its utility. It is easy to understand how a commodity such as gold can evolve into money.
As with any technology, digital currency is a tool developed to meet a perceived need and is neither good nor evil in itself. It was certainly not the first medium of exchange used to purchase drugs or other illegal material, nor will it be the last. However, the immediate reaction of some such as Senators Charles Schumer of New York and Joe Manchin of West Virginia was to shut down bitcoin when the drug trafficking connections came to light in 2011 (Slattery). Now the discussion centers around regulation more than shutting down, but the impulse is similar. Much of the worry over digital currency comes from the lack of authority overseeing its use. Bitcoin, for example, places a high level of responsibility on the user. Transactions are irreversible, so both parties in an exchange must have established some form of trust. No third party facilitates the exchange of currency. Additionally, all transactions are transparently tracked by the very construction of the software. This allows a high degree of security from identity theft as well as a public regulatory framework lacking from governmental currencies. Hence many of the services that the economy relies on government to provide are hardwired into digital currencies.
All of this however, merely details certain structural benefits of cryptocurrencies. They say nothing about the morality of an ungoverned currency. Looking at Ross Ulricht, the man convicted of running the Silk Road website, it is certainly not the spokesman anyone would want for a emerging technology. Between conspiracy, drug trafficking charges, and attempting to hire a federal agent to commit murder, Ulricht seems to be a compelling argument against any and all uses of a digital currency (Mullin). However, this story is merely a highly visible anecdote, an outlier rather than a trend. Thousands of legitimate merchants accept bitcoin, and while it may not be integral to their business models, its use is significant as a counter to the one publicized illicit example.
There are always those who seek to exploit new technology. Or put another way, frontiers tend towards lawlessness. There is always a period of adjustment before civilization takes hold when exploitation is easy. Eventually, authority catches up, and once again society can regulate itself and the rule of law will prevail. To paraphrase a prophetic passage from science fiction writer Neal Stephenson, new technology, and especially these new digital currencies are like the gold rush. At the beginning you have criminals moving west, murdering, stealing. Outlaws robbing miners, lawlessness. But before too long, towns grow up, sheriffs move in, and everybody kicks out the outlaws. And before too long you wind up with San Francisco (Stephenson). It wasn’t the gold that was the moral problem there, though there are certainly those would argue the ‘money is the root of all evil’ line. The problem is adaptation, not unethical technology. It just takes time, and if digital currency catches on in a lasting way, its lawless days will be nothing more than a footnote.