Sonya Mann works in communications and marketing at the Zcash Foundation, a financial privacy non-profit. She is a former technology journalist.
For Americans, it can be easy to discount the social relevance of censorship-resistant digital assets like bitcoin.
Unlike people living under authoritarian regimes, we are free to enter into commercial transactions how and when we like, right?
Well, not always.
Many Americans find themselves unable to access the financial system for political reasons. It’s a frustrating experience that cuts across ideological lines. Common targets of financial exclusion include sex workers (regardless of whether their work is legal), drug users and — oddly enough — gun rights organizations.
New York vs the NRA
For a recent example, look to the National Rifle Association and its run-in with New York State.
Although the NRA is a controversial organization, prone to selective advocacy and partisan rhetoric, the group’s activities are indisputably legal. Freedom entails being able to say and do controversial things, especially when those things are explicitly protected by the Constitution.
The NRA’s mission is to protect and promote Americans’ right to keep and bear firearms. The organization likes to bill itself as the oldest civil rights advocacy group in the country. So, readers may be surprised that the NRA claims to have struggled to access financial services. In May, the non-profit decided to sue governor Andrew Cuomo and the state’s Department of Financial Services.
“The NRA presented as evidence an April letter from Maria Vullo, the DFS’s superintendent, warning banks under her purview about the ‘reputational risk’ of doing business with gun-rights groups,” according to National Review. “The state also pressured the companies behind the scenes, the group claims.”
If these allegations are accurate, it’s an echo of the Obama administration’s Operation Choke Point, in which the government put pressure on banks to stop enabling legal but disapproved-of businesses. In 2014, the US House of Representatives’ Committee on Oversight and Government Reform found that the initiative was intended “to deny [certain] merchants access to the banking and payments networks that every business needs to survive.”
The committee’s report noted that “bank regulators labeled a wide range of lawful merchants as ‘high-risk’ — including coin dealers, firearms and ammunition sales, and short-term lending.” Thereby, “Operation Choke Point effectively transformed this guidance into an implicit threat of a federal investigation.” The effort was deemed an illegal abuse of power by the Department of Justice, and eventually shut down.
Yet even upstream of payment processing, e-commerce platforms like Shopify are kicking off gun-related merchants. “We have invested more than $100,000 in the development of our Shopify store, which will disappear once these policies go into effect,” said Cole Leleux, the general manager of firearms dealer Spike’s Tactical, in an interview with the Daily Wire. A platform like OpenBazaar not only wouldn’t do that, it wouldn’t be able to, because the marketplace is designed to prevent top-down censorship.
When it comes to reputational risk, many banks would be wary of serving someone like dissident gunsmith Cody Wilson, whose projects include publishing free weapons schematics and selling machines for the home manufacture of firearms. His activities are legal, and in fact, litigation comprises much of his activism. But Wilson is a radical, and finance firms tend to eschew radicalism. (That is a problem in-and-of-itself, but we’ll leave it aside for now.)
By contrast, the NRA is a longtime figure of the establishment. It doesn’t just work within the system; the NRA is the system. It has close ties to politicians and firearm manufacturers alike. Whether or not you like guns or the Second Amendment, it should be alarming when a legacy institution as entrenched as the NRA is turned away by financial service providers, especially as a result of state pressure.
That financial discrimination shows just how precarious Americans’ rights are in actual practice. What if a financial regulator decided that the ACLU’s First Amendment advocacy was distasteful, and jeopardized the group’s ability to accept donations?
The point is not that every bank should be forced to work with the NRA. For some banks, refraining from doing business with the NRA may make commercial sense. If the reputational risk, or cost of monitoring compliance, outweighs the revenue that a financial services company can garner from a controversial client, it’s a rational business decision to drop that client.
An imperfect solution
However, the NRA’s case demonstrates the critical need for permissionless financial infrastructure. A truly open financial system would mitigate the state pressure brought to bear against private organizations that advocate for Americans’ constitutional rights. It would also protect provocateurs like Cody Wilson, who may pose a legitimate threat to the PR and marketing needs of a traditional, centralized bank.
Cryptocurrency is the solution to financial exclusion — if an imperfect one at present. Anyone in the space knows that the promise of a robust parallel system has yet to be fulfilled. Usability and adoption remain low. Bitcoin privacy is far from perfect (although it is steadily evolving, and alternate options like zcash and monero are available). The tax and regulatory environments remain intimidating, which is a huge problem for merchants.
And yet, despite all those caveats, cryptocurrency continues to hold the promise of financial freedom. The cypherpunk approach is not to rely on the government upholding the Bill of Rights, but to write code that will guarantee those liberties cannot be taken away. Cryptocurrencies that are trustless and distributed already provide an incredible advantage: You can exchange value, even across great distances, without having to do a song and dance for a gatekeeper.
In this bear market, it’s important to remember the revelatory nature of Satoshi Nakamoto’s innovation. Freedom entails being able to say and do controversial things — and when it’s true freedom, you don’t have to beg for permission first.
The author thanks Andrew Glidden, Preston Byrne, Jon Stokes and Robert Mariani for reviewing an early draft of this article.
U.S. Constitution image via Shutterstock