Bitcoin shows the power of decentralized money

As the war between Russia and Ukraine continues to rage, the human toll and cost cannot be underestimated; this tragedy must be resolved as quickly and peacefully as possible. In the context of these unimaginable costs, discussing financial measures and the like may seem trivial. Seemingly innocuous, but the financial headlines and actions taken by both Russia and the nations supporting the Ukrainian people sparked important conversation and debate. At the heart of the problem is the following question, among others; what role do cryptocurrencies have to play in times like this?

Before we analyze some of the more direct implications of crypto, both now and in the future, there is something that needs to be addressed – the rise of more centralized crypto options. As new and varied applications such as stablecoins, non-fungible tokens (NFTs), decentralized finance (DeFi) opportunities, and central bank digital currencies (CBDCs) have risen to prominence, the move away from true decentralization has been unmistakable. This horrific dispute proved that – despite the convenience and traction that some of these newer options have generated – there is fundamental power in the idea of ​​decentralized currencies.

Let’s take a look at some of the truths Bitcoin has proven and will continue to prove in the future.

Decentralization is necessary. Aside from the debates that can rage in person or via online forums, the power of decentralization is indisputable. Time and time again, the centralization of power, control of information and lack of options have led to fewer choices for consumers, restrictions on access to those choices and a less dynamic market. The turmoil and chaos that accompanies the war in Ukraine has also caused turmoil in the financial markets, with innocent civilians and the civilian government bearing the brunt.

Ukraine’s central government directing to accept donations denominated in bitcoin and ether, and collect over $50 million to date, this demonstrates the pure power of decentralized finance options. For those most in need of access to traditional financial systems, who have been shut out of these services, decentralized cryptocurrencies have proven to be an invaluable lifeline.

There are certainly questions to be asked about how cryptocurrencies could be used to evade sanctions, but it’s not as clear cut as it first appears.

Crypto is being decriminalized. Even though the amount of institutional interest and investment has continued to accelerate since 2020, there has been a recurring accusation that cryptocurrencies – especially decentralized options – are primarily used for criminal activity. In light of recent events, this charge has been expanded to include countries using cryptocurrencies to evade financial sanctions. A seemingly accurate accusation, but not entirely accurate.

First, the idea that cryptocurrency is untraceable is not true, and especially not true for cryptos such as bitcoin and ether – the public ledgers underlying these instruments can be analyzed by anyone, including law enforcement. Second, as vast as the crypto-asset space has become, the liquidity available would simply not be sufficient for widespread sanctions evasion at the nation-state level. Finally, but most importantly, major crypto exchanges – in addition to requiring Know-Your-Customer (KYC) and Anti-Money Laundering (AML) compliance.

With most major crypto exchanges cooperating with lawmakers and regulators, this possibility of illegal crypto use has been curtailed.

Widespread adoption will be accelerated. The ongoing conversation and debate surrounding the impact and implications of crypto-assets will also have a second-order effect; accelerating widespread adoption. While media around the world has brought the original use case for cryptocurrencies – decentralized money not controlled or governed by a central government – ​​to the proverbial forefront for many people, the enthusiasm for this case of use is undeniable.

As with virtually any other technology or significant change in the way data is processed and managed, a front-page push can help accelerate adoption by non-expert audiences. Directly observing the impact of cryptocurrencies on individuals and enabling freedom of exchange, despite all that is happening in the world, may well be the impetus for regulators and policymakers.

Cryptocurrencies and blockchain technology have proven time and time again the value they bring to the market, and the wider global media communicates these attributes almost continuously. Cryptocurrencies have come a long way since the original bitcoin blockchain white paper was published online, and the original genesis block launched the entire broader crypto-asset ecosystem. During this acceleration and continued growth and adoption by individuals and institutions – as creative and dynamic as they are – have continued to evolve and pull crypto further towards centralization trends. In the face of all this excitement, it would be easy to forget that the true and original power of cryptocurrency was the borderless and decentralized fundamentals tied to this technology. Markets, regulators and market participants would be well advised to learn this lesson in the future.