Cryptocurrency
is rapidly gaining popularity. Cursory research into cryptocurrency reveals the
pros and cons of trading/investing in cryptocurrency. Since this is a new
development, it would be worthwhile to ponder if any active participation in
cryptocurrency violates/disobeys any biblical principles/doctrines so much so
that our participation could be termed sinful.
Before
analyzing the pros and cons, understanding some basic facts about
cryptocurrency (without getting into technicalities) would be in order:
Cryptocurrency: Investopedia
states, “A cryptocurrency, broadly defined, is virtual or digital money that
takes the form of tokens or “coins.” While some cryptocurrencies have ventured
into the physical world with credit cards or other projects, the large majority
remain entirely intangible... Cryptocurrencies are almost always
designed to be free from government manipulation and control, although as they
have grown more popular, this foundational aspect of the industry has come
under fire. The cryptocurrencies modeled after Bitcoin are collectively called
altcoins... there are more than 10,000 cryptocurrencies in
existence as of November 2021.[1] While many of these cryptos have
little to no following or trading volume, some enjoy immense popularity among
dedicated communities of backers and investors.”1
Types Of Crypto: Bitcoin, Ethereum
(ETH), Litecoin (LTC), Cardano (ADA), Polkadot (DOT), Bitcoin Cash (BCH),
Stellar (XLM), Dogecoin (DOGE), Tether (USDT), Monero (XMR), and Binance Coin,
are a few types of cryptocurrencies.2
Why
So Many? “The majority of cryptocurrencies today are derived in some form
or another from Bitcoin, which uses open-source code and a censorship-resistant
architecture. This means that anybody can copy and tweak the code and create
their own new coin. It also means that anybody is free to join its network or
transact in it.”3
Bitcoin: According to the Christian Courier, bitcoin was, “The
first-ever implementation of cryptocurrency, created anonymously by Satoshi
Nakamoto, and outlined in a 2008 paper entitled, “Bitcoin: A Peer-to-Peer
Electronic Cash System.” Technically, it is “a consensus network that enables a
new payment system and a completely digital money. It is the first
decentralized peer-to-peer payment network that is powered by its users with no
central authority or middlemen,” according to bitcoin.org. “Bitcoin is
open-source; its design is public, nobody owns or controls Bitcoin and everyone
can take part.””4
Why Bitcoin Is The Most Important: “Despite
thousands of competitors that have sprung up, Bitcoin - the original
cryptocurrency - remains the dominant player in terms of usage and economic
value. Each coin was worth roughly $60,000 as of November 2021, with a market
cap of more than $1 trillion.”5
Jesus Coin: “Forbes reports that a new
cryptocurrency called "Jesus Coin" has launched and is drawing
substantial amounts of investor interest and attention. And yet, the currency
itself seems to have been launched as a hoax or as a joke...”6
The pros and
cons of actively participating in cryptocurrency are as follows:
The Case For
Cryptocurrency
Quite a few
Christian voices endorse the usage of cryptocurrency. One among them is Pastor
Tim Challies. He provides valuable information as to why cryptocurrencies would
be beneficial to the Christian church and the Christian community. He writes:7
[Emphasis Mine]
So what does the world of Bitcoin,
blockchain, cryptocurrency and what’s being called “web3 technology” have to
offer the church? And how should Christians be engaging with this technological
revolution?
In just over a decade, crypto has
grown from a tiny fad for fringe computer nerds to a major force in today’s
financial world. That’s because blockchain, the underlying technology that is
used by cryptocurrencies, has the potential to prove one of the most profound innovations since the printing
press...
Blockchain technology addresses some
of the most urgent concerns with modern monetary policy and in that way
promises to help protect the poor and
most vulnerable by securing property rights, thwarting theft, minimizing
inflation, and giving access to a monetary system that traditional banks or
financial institutions would not. It is true, however, that many of these
projects will turn out to be ill-fated moneymaking schemes, silly memes, or
worse. But that is true in the business world and the world of the internet as
well. The existence of bad actors does not mean that wise investments and godly
creativity cannot occur in the same space, using the same technologies.
Though sin may find expression
through tools, its source is the human heart. Human history proves again and
again that the technologies that may be used to do evil can also be used for
godly ends. As Christians, therefore, our approach to technology must not be
fearful but hopeful, because we have been given the mandate to subdue and rule
over the world for God’s glory (Genesis 1:26–28).
... Not only
do cryptocurrencies provide sound,
permissionless monetary systems able to be used by believers in repressive
countries, they also provide an accessible and proven engine for financial
creation that stands to benefit the Church and the individual believer.
The web3 space offers increasing ways to wisely and carefully invest, with
decentralized finance staking rewards and interest-bearing custodial accounts
incentivizing and rewarding patience. For every dog-themed meme coin there
are now tens or hundreds of carefully created projects with actual real-world
value.
To participate in the present web3 economy, Christians need not become
discontented or greedy. They can walk in this new world the
way we have always walked, by applying
the same biblical wisdom and Spirit-filled guidance that lead us in every other
area of their life, financial or otherwise.
Additionally, the blockchain minimizes costly transfer,
banking, and credit card processing fees which currently take a bite out of
almost all financial donations and transactions. It allows resources to move
freely to aid Great Commission (Matthew 28:16-20) ministries, churches, and
missionaries inside countries that suppress the church by restricting currency
transfers.
An article
entitled Would Jesus Buy Bitcoin
offers reasons as to why Churches should actively participate in
cryptocurrencies. Here’s an excerpt:8 [Emphasis Mine]
“In a mission context, it’s very
exciting,” says Runyon, noting that churches
will be able to send money immediately overseas to relief and development
projects, and can track where that money
goes on the blockchain...
“It takes misappropriation out of the equation.”
...Peers sending peers cryptocurrency, immediately, in a transparent,
traceable way, with little to no fees. It
can’t be laundered, filtered, or intercepted. People can even secure loans via smart contracts in the crypto space, or have a savings account with
“stablecoins,” pegged to the U.S. dollar and therefore their value remains
stable.
The Case Against Cryptocurrency
Christian Courier offers a word of
caution:9 [Emphasis Mine]
As with any emerging technology,
there are drawbacks. Here’s a short list: While the potential for hacking and
fraud isn’t quite as high as it once was, the risk still exists; Bitcoin’s value is highly volatile, making it tricky to use for everyday purchases;
energy use is extremely high (coins are “mined” by people using high-powered
computers, often on huge data farms in China. For people concerned about energy
conservation, the “proof-of-work” model currently used in mining, is cause for
reflection); “gas fees” for ethereum (ie., fees paid when making digital
transactions) are extremely high, making it prohibitive for many. Many coins
are unstable, making the potential for
loss relatively high; and, lastly, securing your funds is 100 percent your
responsibility, and requires knowing how the complicated system works, owning
and storing data on a hardware “wallet,” and creating, remembering and
safe-keeping a password (or “key”). If you forget your key, you’re out of luck.
There’s no “reset password” button in
the crypto space. If you lose your key, you lose your crypto.
Associate
Professor of Economics at Williams College, Greg Phelan, mounts a scathing
attack on the active Christian participation in cryptocurrency. He equates cryptocurrency to gambling:10 [Emphasis Mine]
Bitcoin and other cryptocurrencies produce no dividends. They will never
provide a place to stay or earned income or even interest. That’s not a
prediction; it’s just a fact. And unlike a stock, which may pay higher
dividends in the future and thus justify a price increase, crypto will never
pay dividends in the future. Future dividends cannot justify a price increase
for crypto.
So why do people invest in crypto? Because they expect the price to rise.
We have a word in finance for an
investment like this—a bubble. An asset that never pays a dividend but has a
price that keeps rising is a bubble. An investor can believe Bitcoin is a
bubble and rationally invest so long as she expects to sell out before the
bubble pops. But that isn’t investing;
that’s gambling, and it’s a zero-sum game...
As a currency, Bitcoin is not as good
as dollars or any other currency. There is no debate about that. The only
explanation for investing in Bitcoin is that people expect the price to rise.
An investor could believe that the transaction value will rise and one day
Bitcoin will be a true currency, justifying the price increase today. I don’t
think that belief is realistic.
All economists agree that a stable
price is highly desirable for a currency. But the price of Bitcoin is
incredibly volatile. The crypto sector knows it, which is why an alternative
class of cryptocurrencies has emerged—stablecoins. Stablecoins are virtual
currencies designed to have a fixed price, because a “currency” without a
stable price won’t last as a currency.
That’s the whole problem with
Bitcoin: it’s not a stablecoin. The price fluctuates tremendously. Becoming a
real currency in the future would require the price to stop rising (become
stable) one day, at which point Bitcoin would need to have the same liquidity
value as other currencies. Bitcoin would have to displace global currencies
like the dollar and the euro to have equivalent liquidity value. Most
economists find that preposterous.
How should a Christian feel about
Bitcoin? Well, how do you feel about gambling as an investment strategy?
Investing in Bitcoin means betting on getting out before the bubble bursts.
That’s a zero-sum game between you and other traders, in which your gains are
their losses. You might make lots of money by investing in Bitcoin—many people
have. But I think it is better to put your money elsewhere, even if that might
mean leaving profits on the table...
Given the choice between investing in
a bubble that enables illicit black-market transactions, or investing in real
assets that one hopes serve the common good—the choice should be obvious for
Christians.
P.S: At the
time of writing this article, India has announced that it will regulate digital
currency. NDTV reports, “...the Centre could bring a Bill in the winter session
of Parliament to bar all cryptocurrencies in India, barring a few exceptions,
and create a framework to regulate digital currency issued by the Reserve Bank
of India (RBI).”11
Endnotes:
1https://www.investopedia.com/tech/most-important-cryptocurrencies-other-than-bitcoin/
2Ibid.
3https://www.investopedia.com/tech/most-important-cryptocurrencies-other-than-bitcoin/
4https://www.christiancourier.ca/would-jesus-buy-bitcoin/
5https://www.investopedia.com/tech/most-important-cryptocurrencies-other-than-bitcoin/
6https://www.investopedia.com/news/what-jesus-coin-and-does-it-foretell-end-cryptocurrencies/
7https://www.challies.com/articles/a-christian-case-for-bitcoin-and-blockchain/
8https://www.christiancourier.ca/would-jesus-buy-bitcoin/
9Ibid.
10https://www.thegospelcoalition.org/article/christian-invest-bitcoin/
11https://www.ndtv.com/business/cryptocurrency-ban-news-cryptocurrency-ban-unlikely-say-crypto-industry-sources-2622667
Websites last accessed on 25th November 2021.
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