Whilst there are many good, economic reasons why cryptocurrency and blockchain have grown since 2009, there is a more emotional reason underpinning it as well, and that is that people in power cannot be trusted. Just last week, we the people were given another file of documents – The Pandora Papers – which underlines why that distrust exists, and is growing.
The Pandora Papers consist of around 12 million leaked documents from law firms and other organisations worldwide. The documents unmask the previously unknown owners of 29,000 offshore companies hiding billions of dollars in assets from taxation or oversight. A good number of these ‘unknowns’ are actually terribly well known public figures in their countries, and some are global figures, such as singer Shakira.
David Z Morris in his thoughtful opinion piece for Coindesk, labels it “aggressive tax avoidance,” adding, “in some cases hidden funds seem linked to outright corruption, much of this activity is nominally legal – but the very existence of such structures almost guarantees they’re being used for deeply harmful ends well beyond dodging taxes.”
It is also estimated that a mind-boggling $32 trillion in assets are hidden in offshore tax havens, which is a figure “roughly 15 times the total value of all cryptocurrency in existence.” Some of that money in reality belongs to the citizens of the 200 countries named in the papers, and should have been used for public infrastructure and services.
Morris rightly suggests that the Pandora revelations make a mockery of governments’ focus on cryptocurrency as a conduit for money laundering, tax evasion and criminal activity. Yes, there are some who may argue that crypto makes it easier for the average person to ‘enjoy’ the same tax evasion benefits as the users of offshore tax havens, but Morris says, not only is this a race to the bottom for crypto, it is a “false equivalency”, because “what world leaders have accomplished through offshore entities and shady banks simply can’t be replicated by average people using crypto.”
That’s because crypto cannot match the secrecy offered by offshore entities. And that is because the use of tax havens “is part of a much larger and more complex system of shadow influence that relies on institutional political power and generational wealth.” Furthermore, they are not just used for tax avoidance, they can hide “state-sponsored drug trafficking, murder and anti-democratic violence,” Morris points out.
Ultimately, what the Pandora Papers show us is something we’ve always known, but perhaps needed to be reminded of: the global banking system provides secrecy to only the wealthiest and most powerful. Cryptocurrency may not be the complete answer to this elitism, but it does explain some of the motivation behind crypto adoption, and that is the desire to escape a system that is rotten to the core.