Would Mao Buy Crypto?
In the third world, crypto enjoys wide use as a kind of fee-free USD, such that 14 of the top 20 countries by crypto adoption are in the Global South. So why do Westerners see it exclusively as a bet?
Illustration: Hou Bo’s 1959 portrait of Mao Zedong, via Wikimedia.
Web 3 is here to stay, just not in the way crypto advocates in the West claim. Blockchain will never – or at least, should never – be used to store medical records, power social networks, or code games.1 It’s a financial instrument, pure and simple. And, despite perennial hype cycles suggesting that a given crypto project is the new sliced bread, crypto is only really used as one thing – a fee-free, quasi-anonymous financial instrument tied to the U.S. dollar.
Though it’s we’ve all heard the joke that the Silk Road marketplace was the only place you could use crypto, the data suggests a very different story. In 2023, 14 of the top 20 countries by crypto adoption were in the Global South. And that metric is leaving out countries like Ukraine, #5 overall, whose citizens are obviously experiencing some financial distress.
These aren’t insignificant markets, either. In India – the largest crypto market in the world – Bitcoin has a market cap of ₹ 105.3T, or $1.3B,2 and it’s far from the only coin in the sea. As of August 2024, there are 10 cryptocurrencies with a market cap of over ₹1T, including the aptly-named USD Coin.
To be fair, $1.3B is just a fraction of India’s GDP. But, considering that number represents the personal holdings of around 7% of Indians – or about 100 million people – it’s worth taking seriously.
Jumping to the bottom of the top-20 list, we find Morocco, which has banned crypto since 2017, although this isn’t enforced. Its only impact is the fact that the 9% of Moroccans who currently or have previously held cryptocurrency must “acquire cryptocurrency by means of cash-based transactions that escape the radars of the government and financial institutions.”3
So, are all these people only using crypto to buy drugs online? Well, no. If you live in a shitty state, there’s many more reasons you might want a fully anonymous, decentralized way to avoid transfer and exchange fees. The Global Southerners adopting crypto are not doing so as an investment strategy, but because they have been so hung out to dry by traditional banking that crypto is a good alternative.
For example, if you as a migrant worker in the United States want to send a remittance home in Mexican pesos, PayPal will take 5% of your transfer, for a minimum of $0.99. And a dollar is no trivial sum to migrant workers, especially those in agriculture, who receive notoriously low wages.
But transfer fees are clearly not the main reason so many are using crypto. (After all, crypto isn’t fee-free either, at least inside the U.S.) If you clicked on the PayPal link above, the first thing you saw was a banner announcing that these fees have been suspended for Ukranians in light of the Russian invasion. Perhaps that waiver is why, of the hundreds of billions in aid Ukraine has received, “only” about $225m of that was in crypto, as of May 2023.
$225m still buys a lot of bullets, I don’t need to tell you. And most of that sum came from private individuals, who otherwise would have paid fees on their donations. If the same amount in donations was received via normal PayPal transactions (i.e., those subject to fees), and we assume that the average donation was about $50 per person, crypto donors saved approximately $11,250,000 in transaction fees.
Of course, this really isn’t an issue for the Ukrainian war effort. Donors can easily avoid fees by using PayPal, since that processor has so generously lifted fees for this specific country. But what if you are – say – a Russian living in Georgia to avoid the war draft, and want to send money home? Or a Russian in Russia, just trying to scrape by? In that case, PayPal considers you ontologically evil, and won’t let you use their services.
Anecdotally speaking, the co-author’s family in Turkiye uses crypto in order to avoid oppressive governmental laws and equally oppressive fees from Western payment processors. And others in Turkiye have adopted crypto to avoid rising inflation, a use case hardly limited to that country.
The reason why cryptocurrencies are useful for avoiding inflation is difficult to understand without first discussing what different currencies do. Westerners sometimes note that they, say, can live modestly on $20 a day in the Philippines, but don’t often realize the economic impact of this action. If a dollar can buy a plate of street food for an American, it can for a Filipino as well. And an American, to whom a dollar means little, might be willing to part with it for a flimsy plastic keychain.
Under these constraints, many would – and do – make a living by making and selling the cheap products that populate Shein, Temu, and landfills across the globe. And it’s not just dollar iPhone cases. Adrenaline junkies from the Global North contribute significantly to the Nepali economy, so some Sherpas join perhaps the deadliest profession on Earth, summiting Everest on behalf of inexperienced tourists, sometimes at the cost of their lives, in exchange for USD. Other countries, most notably Eritrea, rely heavily on remittances from emigres to remain financially solvent. And even when the entire economy isn’t reliant on remittances, individual families often are. This is a common situation for Mexican and Central American workers in the United States.
Admittedly, this is all a bit abstract. Let’s take a step back and imagine what the world might look like if wealth in dollars was correlated 1:1 with land mass. In other words, the bigger a country is on this map,4 the wealthier it is.
Now, this map doesn’t mean that small countries have no resources. Frequently, the opposite is true. For example, the Democratic Republic of the Congo, mite-sized on the above cartogram, probably mined the cobalt in the battery of the device you’re using to read this essay. But the country retains none of the wealth it helps to generate. Disproportionately, wealth generated by cobalt batteries flows to the United States or Europe, not the D.R.C.
Think of these small economies as leaky buckets. Though value is constantly being poured in through – say – cobalt mining, it leaves again through the hole in the side called runaway deflation, or debts to colonial masters, or cheap foreign imports… There’s a myriad of ways this happens, but the end result is the same. A French farmer becomes much wealthier for the same work performed by his Senegalese counterpart, thanks to the accident of his birthplace.
Often, these leaks were created by colonialism or imperialism. If a colonial master showed up two centuries ago and destroyed all your manufacturing, set up new factories only they could run, and then left without handing you the keys to your infrastructure – would it really be such a surprise when all your wealth continued to flow to them? That’s what your country was designed to do.
When a country is poor, it’s difficult to turn around, because generating wealth requires having wealth in the first place. Under the normal rules of financial engagement, a cobalt deposit is only valuable if you can afford the cost of mining it. The D.R.C. cannot. Instead, it must lease the rights to mine to predatory countries from wealthy nations, who have no qualms about reinstituting slavery on someone else’s soil.
In the end, the D.R.C. is poorer for cobalt mining. The Congolese workers, some of them still children, would suffer from its knock-on effects for the rest of their lives if the mines closed tomorrow. And all the cobalt they’ve mined has done nothing to enrich themselves, and everything to enrich the people exploiting them. This is the cornerstone of neocolonialism: the simple fact that colonial systems have continued to function in modernity, even without colonial masters on the ground maintaining the system.
If decolonization had worked, we would expect the African countries on the above map to be as big as their European counterparts. But they’re not. And this wealth discrepancy is reflected even in something so everyday as currency.
We’ve driven well past our main point, so let’s return to it now. What does all this have to do with currency, crypto and otherwise? Simply put, the disparities between nations are reflected in the financial instruments we use every day. Currencies – and namely, the act of buying and selling one for another – are extremely reflective of the wealth disparities between states.
When you exchange a dollar for £0.83, it’s not an act of alchemy. You are handing a currency exchange $1, and they hand you back £0.83 from their vault. The price for £0.83 is different from exchange to exchange, depending not only on their stock of pounds sterling but global market conditions. And one of the most important conditions is the strength of the currencies in question.
See, while $1 buys less than a pound, it buys about 144 Japanese yen,5 and $5 buys enough yen to go out to eat.6 This is because the dollar is weaker than the pound, but stronger than the yen, and the exchange rate reflects that. And weaker currencies, by definition, are much more likely to be subject to disastrous inflation or deflation.7
This is a curiosity if you’re an investor, but a real pickle if your food money rapidly devalues overnight. In May 2024, for example, holders of the Argentine peso had to grapple with 287% inflation. What do you do if last month’s rent money can barely cover groceries today, even though your bank account hasn’t moved a cent?
An individual can’t win under these conditions. Instead, they must change the rules of engagement. One way you can do this is by changing the currency you operate in, as many Argentine landlords have by charging rent in USD. So now, as an Argentine renter, you need to sell your pesos, preferably to an exchange with a relaxed fee structure.
But you can’t just get USD from anywhere. Online payment processors such as PayPal charge punishing fees for currency exchange and transfers, not to mention taxes. Plus – since the act of selling a currency makes it less valuable – many countries restrict the sale of their currency, including India, Morocco, and Argentina.
Enter cryptocurrency. Its core promises of a currency untethered to any state, tax code, or regulatory body may sound like ridiculous libertarian tinfoilism, if your state is good to you. If it isn’t – and most people’s aren’t – that promise starts to sound quite different. Americans experiencing 8% inflation (2022) and Argentines experiencing 276% inflation (2024) need very different things out of a financial instrument, after all.
When an American sells dollars for Bitcoin, they’re hoping that the price of Bitcoin will go up relative to the dollar. Though an Argentine Bitcoin buyer might hope for the same, investment is not what drives the biggest price trends. What caused Lemon, a cryptocurrency exchange popular with Latinoamerican retail investors, to reach its highest weekly value in 20 months this March was Argentine anxieties about inflation. In more jargon, they’re betting that the price trends of the dollar and Bitcoin will be much less severe than the trends of the peso – and betting in such large groups as to significantly change prices.
And it’s a safe bet – which is crazy, if you know anything about Bitcoin. As an abstraction of the stock market, Bitcoin is pure game theory. You buy when other people think it’s going to go up, and sell when other people think it’s going to go down. As a result, Bitcoin’s price fluctuates wildly, sometimes changing an order of magnitude overnight.
Despite that, Bitcoin is still more stable than the Argentine peso. Even if Bitcoin experiences a wild crash, even if its value drops 50% or more overnight, chances are good your Bitcoin will remain more valuable than your peso. In our current economic system, the economy of an entire nation is worth less than the power-guzzling slot machine of Western libertarians.
The cherry on top? Had you known 48 hours in advance that Lemon’s Bitcoin demand would spike, you could have turned a tidy profit by buying some cheap, pre-price-trend Bitcoin and selling it at a markup to Argentine buyers desperate to secure their savings against an unpredictable economy. At base, investing in crypto is forex with a shitty cyberpunk paint job.
For all its failed promises, crypto does make good on a few. Unlike a lot of other financial instruments, cryptocurrencies are easily accessible to anyone with a computer and wifi connection. Governments are still struggling to effectively regulate it. And, through Western investors, a great deal of wealth has poured into crypto exchanges and stablecoins, and that wealth can be accessed by anybody, no ISDA required. If your only other option to get USD is scaling Everest or working in a sweatshop, you might also see the allure in playing the USD craps table – especially if your casino chips retain value better than the currency you buy food with.
So, does this mean that leftists in the Global North should adopt cryptocurrency out of solidarity? After all, given the transformative power of movements like Support Black-Owned Businesses, which aim to solve poverty by putting dollars in communities, one might understand crypto as doing the same for communities across the globe.
While wider adoption would create more liquidity in the market, it’s not clear that a stronger crypto market would actually accomplish such a lofty goal, or be worth the harm it causes. Setting aside for a moment the question of crypto scams, the environmental impacts of crypto alone are reason for serious pause.
There’s the boom and bust of Kazakh crypto mines, two explosions that first crashed the power grid, then abandoned tons of e-waste in the country when miners were chased out. In the years they were there, “the industry simply came and went, draining hundreds of millions of dollars in state subsidies, enabling corruption, squatting on the energy grid, and burning thousands of tons of coal per day.”8
Most Bitcoin mining today is done in the States, Russia, and China. But even if it were mostly occurring in first-world countries, the environmental impact would be unconscionable. This isn’t limited to energy concerns, but also ones of land, water, and e-waste. In other words, even if Bitcoin mining used completely green energy, it would still be environmentally deleterious.
To be fair, Bitcoin is uniquely wasteful among cryptocurrencies as a proof-of-work chain. Others use proof-of-stake, which effectively eliminates the mining part of the process, and uses something like 1000% less energy than proof-of-work. But the continued presence of Bitcoin mining operations, almost two years after Etherum switched entirely to proof-of-stake, shows that the crypto ecosystem simply doesn’t care about its environmental impacts.
And, of course, there’s fraud.
Third World crypto adopters aren’t stupid. They know that fraud is rampant in the ecosystem, and that there’s effectively no way to recoup stolen tokens. But corruption or underfunding in the judiciary can effectively guarantee that fraud isn’t actually punished, regardless of what currency it’s committed in.
That’s less of a concern in the First World, where trust in the legal system is generally high, thanks to low perceived corruption. But if you live in a situation where financial fraud is omnipresent, the fact that it’s difficult to get recourse against bad actors in the crypto sphere is not a bug. It’s the status quo.
Taken holistically, we’re left with a set of rather grim reasons the Global South has adopted crypto. That is: it sucks, but there’s not a better game in town. Your money might be lost in a pig-butchering scam, but it will be lost to inflation otherwise. Bitcoin mining does make communities unlivable, and it does contribute to the climate crisis that will eventually make entire countries unlivable, but those are pretty far-away concerns if your paycheck’s been reduced to pennies, aren’t they?
Crypto, as it currently stands, is one of many tools that Global Southerners can use to better their lot. It’s not even a particularly good tool. It’s subject to crazy prize fluctuations, requires horrific amounts of electricity, and often devolves into a game of scammer whack-a-mole. Our point here is not that crypto is Secretly Good, Actually.
Rather than assume victims of crypto fraud are mostly or exclusively affluent Westerners who can recover their losses, we must understand that some of the people who were screwed over by $MARBLES were trying to send remittances home. Others were trying to avoid geopolitically-induced financial ruin. Some just didn’t want to give PayPal more money. Only when we take these use cases seriously will we understand how best to regulate, use, and redefine cryptocurrencies.
The Western press tends to cover crypto one of two ways: either it’s the shiniest financial instrument since gold, or a scam whose victims have no one to blame but themselves. We reject both framings. As a tool, crypto reflects the grimmest things about modern markets. The entire global economy is reliant on fraud, greed, and the exploitation of people too poor to escape. Crypto miners in Kazakhstan, AxieInfinity players in the Philippines, and Bitcoin buyers in Argentina are not liberated by whatever wealth they’re able to siphon out of the crypto space.
But neither are they liberated by making cheap tchotchkes for Westerners. It’s hard not to notice the peculiar framing of anti-crypto advocates, who seem to believe that if crypto stopped existing tomorrow, the world would go on entirely unchanged. It wouldn’t. More wealth would be kept by payment processors, corrupt officials, and Western treasuries, and more lives would be destroyed by the constant fluctuation of currencies. And the end result of that is, unavoidably, a greater reliance upon the shoddy systems that already exist.
Crypto is a toolkit that allows one to work in parallel to the system as it currently exists. If it were capable of dismantling the system, it might be worth praising, but it’s not. It is, after all, still the master’s tool. As a speculative financial instrument, it can only exist in a world where investors bet on the price of currencies, and such a world is deleterious to life on Earth. When maximizing shareholder revenue is the market’s biggest concern, then human rights, animal welfare, and habitat preservation have to take second place.
In Western countries, crypto is treated as a mostly-domestic problem, for which conventional financial regulation needs to be applied. In an interview with The Financial Diet, Dan Olson argued that the act of buying into cryptocurrencies is “legitimizing this experiment that is attempting to dismantle … our already fragile social systems. It’s attempting to starve out our public works.”9 (Emphasis ours.)
There’s no doubt that this is true of the sort of USian or Canadian N.F.T. bro Olson encounters on the daily. They are extraordinarily loud on the Anglophone internet, and as such, easy to take as representative. And for them, dodging government oversight is primarily valuable because it dodges taxation, an act which invariably starves public works.
But there’s that little word – our. To be clear, cryptocurrency probably does result in lower taxation revenue for Western nations. If a Georgian doesn’t have to give PayPal 5% of their money wire 5 km across the Armenian border, then PayPal doesn’t have to pay taxes on that revenue. The end result is that more wealth stays in Georgia, and less is funneled to the U.S.
That’s a good thing, though. Powerful financial institutions based in the Global North siphon fees from all over the world, taking even more wealth out of the Global South and into oblique, unequal dragon hoards jealously controlled by the world’s luckiest. The fewer people that participate in that system as it currently exists, the better.
What regulation currently exists is a bandaid over a scurvy sore. See, the problem with crypto is not taxes, or scams, or even energy grids. It’s the fruit of a poisoned tree, one we variably call Financialization or Globalization or any other such fancy word. No matter what you call it, the truth looks the same. Crypto is just as dangerous and powerful a tool as forex and short selling, and will prove just as difficult to regulate.
Flat-out bans such as exist in Morocco have proven useless for a simple reason. Any effective solution to the regulatory problems posed by crypto must begin with building fairer systems outside it, such that less and less people need to use crypto in the first place. And any fairer system must take into account all the people who will be using it.
Online payment processors like PayPal presented themselves as solutions to new gaps created by the Information Age. But new institutions, just like the old ones, have a fatal flaw: they put profit over people. So long as our financial institutions are primarily dominated by shareholders’ desires, they will continue to screw over the billions of average people who rely on them.
And some of those people will always chose crypto instead.
These are all examples from the seminal Folding Ideas documentary “Line Goes Up,” which is an essential introduction not only to the NFT craze of 2021 but to the crypto ecosystem as a whole. So too is the Silk Road joke. We pick on it throughout the essay because its clear-headed, hype-free approach make it extremely easy to quote. Go check it out, if you haven’t already.
Per Gadgets360 as of 26 August 2024. The conversion from Indian Rupee to USD was done the same day with the Google Currency Converter.
Zakaria Bziker, The status of cryptocurrency in Morocco, Research in Globalization, Volume 3, 2021, https://doi.org/10.1016/j.resglo.2021.100040. (https://www.sciencedirect.com/science/article/pii/S2590051X21000058)
Made with go-cart.io. For the purposes of this essay, we have opted for absolute over PPP because absolute is more relevant in the context of international trade, whereas PPP is a better measure of an individual’s cost of living and economic wellbeing. This map is not, therefore, describing how expensive bread is, but rather how each country is situated when trading with one another. To see a similar cartogram using PPP, visit this site.
As of 25 August 2024.
As of 25 August 2024, $5 buys ¥721.82, which is on the lower end of Numbeo’s inexpensive restaurant estimate, and just short of a McDonald’s combo meal. It’s been a long time since anyone in the States could get a McDonald’s combo for $5, as evidenced by Numbeo’s estimate that cost of living in Japan is 25.7% lower than in the U.S.
What makes a stronger or weaker currency is a complicated alchemy. One of the most important factors is trust that a currency will remain stable, but issues with the central bank or a sudden lack of investor confidence can cause a bank run that quickly weakens the currency. Perhaps the most striking example of this is the 1997 Asian financial crisis, which was triggered by the sudden devaluation of the Thai baht.
 | A guest post by
|