Faith Matters

Diarmuid Pepper: Cryptocurrency Bitcoin doesn't add up to a better future

Pope Francis has appealed for a rethinking of the relationship between individuals and the economy as we emerge from the coronavirus pandemic. Bitcoin, the best known cryptocurrency, should not be part of any new economic future, argues Diarmuid Pepper

Diarmuid Pepper

Cryptocurrencies are complex, with Bitcoin requiring enormous energy and computer power to be used to 'mine' the 'coins'. Pope Francis has warned against the global inequalities inherent in such developments

"WHAT does it profit a man to gain the whole world, yet forfeit his soul?"

When it comes to Bitcoin, the preeminent cryptocurrency, these words of Jesus, recorded in Mark 8, take on an elevated importance.

It is a question of not only forfeiting our soul, but also our common home. The energy consumption required to power Bitcoin is truly astonishing. The cryptocurrency uses more electricity than most countries, outstripping Argentina and Holland.

It also uses more than seven times as much electricity as all of Google's global operations.

This is a trend that is not slowing down and more energy has already been used to power Bitcoin so far this year than that exerted in 2020.

It's something that has caught the eye of the Pope. It's over six years since Pope Francis published his second encyclical, Laudato Si', in which he criticises wanton consumerism and environmental degradation.

During Laudato Si' Week in May, he tweeted: "Technology based on the use of highly polluting fossil fuels needs to be replaced without delay."

The reason for the energy intensive nature of Bitcoin is its complex public ledger system. In an effort to get rid of middlemen, be they banks or governments, Bitcoin transactions are managed by a network of Bitcoin users all across the world.

In the beginning, any modest home computer could easily partake in the process of verifying transactions on this public ledger, for which they could be in line for newly-created Bitcoin, of which there are 21 million.

But the computational power needed has exploded to the point where huge warehouses store supercomputers that are constantly running to obtain more Bitcoin.

The physical waste it produces is also mounting. The machines needed are getting more and more complex, with older machines simply being dumped.

One respondent to the Pope's tweet asked him to be mindful of how "people in poor countries use Bitcoin to protect themselves from local inflation".

But Bitcoin doesn't protect poor people. Those in developing nations will be worst affected by the climate emergency.

In Laudato Si', Pope Francis warned that "climate change is a global problem with grave implications".

"Developed countries ought to help pay this debt by significantly limiting their consumption of non-renewable energy and by assisting poorer countries to support policies and programmes of sustainable development," he added.

But there is an even more tangible way in which Bitcoin harms the poor, as it is a currency even more unequal than our major forms of currency.

Around 80 per cent of Bitcoin holders are male; some studies estimate women account for less than five per cent of Bitcoin investors.

Just two per cent of Bitcoin holders own 95 per cent of the cryptocurrency; more than 70 per cent of holders own less than 0.01 Bitcoin.

In early June, El Salvador passed a 'Bitcoin law', which gave the cryptocurrency the status of legal tender in September.

It's a move that has marginalised the elderly and the poor. Nine out of 10 El Salvadorians lack a clear understanding of what Bitcoin is, while eight in 10 have little or no confidence in it.

Almost 50 per cent of the country lacks internet access - essential for cryptocurrency - and more than 70 per cent don't have a bank account.

During Laudato Si' week, Pope Francis warned that, "Technology based on the use of highly polluting fossil fuels needs to be replaced without delay" - comments understood to be directed at developments including energy-intensive cryptocurrency 'mining'

Protests have erupted across the country where demonstrators have set Bitcoin ATMs on fire and held aloft signs reading 'No to Bitcoin'.

Pope John Paul II penned an encyclical that said "a stable currency" enables "the conditions for steady and healthy economic growth". Bitcoin crashed by 20 per cent on the day it was adopted in El Salvador.

Bitcoin also makes tackling human and child sex trafficking more difficult. It's a mammoth task to decrypt the public ledger of Bitcoin transactions that supercomputers verify, and methods of evasion used by criminals are becoming more sophisticated.

In 2019, close to £700,000 worth of Bitcoin and Ethereum (another leading cryptocurrency) payments were made to addresses linked with the sale and production of images of child sexual abuse.

In the same year, US authorities jailed a South Korean national for operating a website devoted to the sale of child sexual abuse material. When people created an account with the site, they were given a unique Bitcoin address and over 7,000 Bitcoin transactions were made to the website.

US authorities also detained a Dutch man over the same offence in March last year. His website advertised "packs" which contained up to 2,000 images and videos of child sexual abuse. He received 187 Bitcoin for these packs, which was valued at £1.18 million at the time of arrest.

Neil Walsh is the chief of cybercrime and anti-money laundering within the UN's Office on Drugs and Crime. He says cryptocurrencies like Bitcoin make "it exceptionally difficult for investigators to track" child sexual abuse.

He added that "babies six months old and younger" are sometimes featured in abuse material being purchased via cryptocurrencies.

Interpol, the International Criminal Police Organization, has also warned that "cryptocurrencies' focus on anonymity leaves them open to misuse by criminals", such as the sale of drugs, people smuggling, and money laundering.

This is something the Church is aware of. In 2017, the Pontifical Academy of Social Sciences hosted a talk by the Bank of Montreal manager Joseph Mari that highlighted the role cryptocurrencies play in money laundering and human trafficking.

The Pope has called for a rethinking of the "relationship between individuals and the economy" as we emerge from the pandemic.

Billionaires and mega-corporations own the overwhelming majority of Bitcoin, it's horrible for the environment, and it enables human trafficking and the proliferation of child sexual abuse material.

Bitcoin should not feature in the rethinking Pope Francis seeks.

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