Bitcoin has steadily grown in popularity since its inception in 2009. We hear about how many people are getting rich quick from it, and how much energy it’s consuming, and how complex it is to mine.
But what we haven’t heard much about is how Bitcoin can play a role in human rights, and can give people who use it more financial and political freedom.
Alex Gladstein is chief strategy officer of the Human Rights Foundation, and he spoke about why Bitcoin matters for freedom in a talk at Singularity University’s Global Summit last week.
“It’s the first time that humans have ever had the ability to send money around the world globally without anyone being able to stop it,” he said. “You can argue that it’s the first time in our history that we have real censorship resistance.”
Gladstein feels we’re at a crossroads as a society—we’ll either go down a centralized path where our interactions are surveilled and censored, or we’ll go down a decentralized one that preserves our essential freedoms and rights.
Technology’s role is somewhat paradoxical in this crossroads; some forms can serve as a tool of control for governments or companies, while other forms put more power in the hands of citizens.
The Chinese government, Gladstein pointed out, keeps close tabs on its citizens’ behavior, location, finances, and communications. Facial recognition tech, smartphone apps, surveillance drones, and smart glasses are all used to gather information as people go about their daily lives, and this information is fed into the country’s social credit system. Obedient citizens gain privileges and praise, while dissidents, intellectuals, criminals, and other non-conformants can be denied access to services.
And that’s not all. “Predictive policing is real in China today. If the regime thinks your social credit score is indicative that you might do something wrong, they can come arrest you before you’ve committed a crime,” Gladstein said.
Less drastic examples exist in the West, he added, but should also be cause for concern, whether we’re talking about our data being sold without our knowledge or consent, our elections being influenced through online platforms, or a reputation score being assigned to Facebook users in an attempt to combat fake news.
Bitcoin, Gladstein believes, can help—and is already doing so. “Until Bitcoin, there was no way to globally transact other than to trust a third party,” he said. “Unstoppable money simply didn’t exist. I posit to you that Bitcoin is a revolutionary upgrade in how humans can network.”
The fact that it’s owner-less and decentralized gives Bitcoin some uniquely resilient properties. It can’t be changed, stopped, or interrupted. You don’t need to know or trust the party on the other end to transact with them. And even within the Bitcoin community, power is distributed; its ‘government’ works like so, Gladstein said:
Miners are the executive branch, because they work to win the right to add another block to the Bitcoin blockchain. Coders write the script that allows the language to upgrade; they’re the legislative branch. And users decide whether or not to install new blocks on their full nodes, making them comparable to the judicial branch.
“No one entity can control Bitcoin,” Gladstein said. “You have to have consensus among three very different groups, which makes it very hard to change.”
In fact, a clue about why Bitcoin was built was left in the code of the first Bitcoin block. It was a criticism of governments printing more money when financial crises take place. Bitcoin could do to financial monopolies what the internet did to information monopolies (that is, disrupt or destroy them).
As an example, Gladstein spoke about Venezuela’s current crisis and skyrocketing inflation. The International Monetary Fund predicted the country’s inflation will reach 1,000,000 percent by the end of this year, and consumer prices have already risen 46,305 percent this year by one estimate.
“Bitcoin is an escape valve for people in Venezuela,” he said. “It gives them a way to store their money that their government can’t vaporize or inflate to nothing. It gives them a way to transact value with their relatives overseas. It upgrades the ability of remittances to be permanent.”
Bitcoin and other decentralized networks are most useful in countries where people can’t trust the government or the banking system. Gladstein said the most recent estimate of the number of people who have used a cryptocurrency is around 75 million, or 1 percent of the world’s population. “But 4 billion people, or almost half of the world’s population, live under an authoritarian regime,” he said. “That’s a massive opportunity. Whether it’s an opportunity for human impact or business impact, that’s up to you.”
He pointed out that it’s important to differentiate between open blockchains like Bitcoin or Ethereum, and private or enterprise blockchains, which are closed, centralized, usually permissioned, and censorable. Open blockchains are the new cash—they give users privacy and free speech, a way to use money without being tracked.
Gladstein shared a relevant quote from essayist and risk analyst Nassim Nicholas Taleb: “Bitcoin’s mere existence is an insurance policy that will remind governments that the last object the establishment could control, namely the currency, is no longer a monopoly. This gives us, the crowd, an insurance policy against an Orwellian future.”
Though Bitcoin’s been around for almost a decade now, we’re really still at its beginning. Cell phones were expensive and hard to use at first too (poor design, low battery life, bad signal), but now people all over the world are using cell phones for cheap and doing much more than just making calls on them. Gladstein sees Bitcoin following a similar cycle of lowered barriers, increased user-friendliness, and wider adoption.
The problem is that Bitcoin was designed to be slow; its creators traded scalability and efficiency for security and censorship resistance. “If we’re going to think exponentially and get Bitcoin into the hands of a billion people instead of just a million people, we have to find another solution,” Gladstein said.
His proposal? Lighting Network, or systems like it. Lightning is a decentralized network that uses blockchain smart contracts to enable instant payments between participants, but transactions are settled off-blockchain, which makes for faster speeds and lower fees. Lightning can do millions of transactions per second.
Even if Lightning Network fails, Gladstein said, it’s useful as a blueprint for scaling decentralized technology. And in his eyes, the future of freedom depends on decentralized tech.
“I think we want to do everything we can to go down a path that has some sort of decentralization,” he concluded. “Where we preserve our freedoms and rights, and our privacy. We are going to want that for the future of our planet and for the future of our species.”
Source Singularity Hub by Vanessa Bates Ramirez
Africa is typically portrayed as a continent dependent on foreign aid and private investment, with money flowing from advanced economies into poor African economies. However, new research paints a very different picture. A June 2018 report by the Political Economy Research Institute (PERI) at the University of Massachusetts Amherst examined capital flight from 30 African countries between 1970 and 2015 and documented losses of approximately $1.4 trillion over the 46-year period ($1.8 trillion if lost interest is taken into account). This amount far outweighs both the stock of debt owed by these countries as of 2015 ($496.9 billion), as well as the combined amount of foreign aid all of the countries received over this period ($991.8 billion). The direction of capital flows actually makes the group of African countries a “net creditor” to the rest of the world – a startling conclusion when contrasted against common perceptions about Africa.
“The traditional thinking has always been that the West is pouring money into Africa through foreign aid and other private-sector flows, without receiving much in return. Actually, that logic is upside down – Africa has been a net creditor to the rest of the world for decades.”
–Raymond Baker, Founding President, GFI
What is Capital Flight?
Capital flight occurs when the value of assets and capital is shifted from one country to another, often from a developing country with a relatively weak currency into a more advanced economy with a hard currency such as dollars, pounds, euros, Swiss francs or Japanese yen. This is because many developing countries are often subject to currency devaluations, exchange rate volatility, high rates of inflation, or political instability, all of which can erode the value of assets. In contrast, wealth stored in hard currencies rarely loses it value. Capital flight also occurs when people want to hide money they have gained illicitly, or to avoid paying taxes, resulting in attempts to shift wealth out of the country and into offshore centers and tax havens. Capital flight can occur both licitly, through foreign investors withdrawing profits, and illicitly, via illicit financial flows (IFFs).
From a global perspective, capital flight diverts money and tax revenue from poor countries to rich countries and deprives developing countries of domestic resources needed for achieving the United Nations Sustainable Development Goals in healthcare, poverty, infrastructure and other critical areas of public investment.
Capital Flight & Trade Misinvoicing
GFI estimates that trade misinvoicing is the most common strategy for shifting capital from developing countries to advanced economies. Trade misinvoicing occurs when companies move money illicitly in or out of countries via the commercial trade system by falsifying the prices of goods on import or export invoices. This process not only facilitates illicit flows of capital out of African economies, it also represents a huge loss in taxable revenues and undermines the ability of many countries to build domestic tax bases. A report produced jointly by GFI and the African Development Bank in May 2013 found that illicit financial outflows from Africa between 1980 and 2009 totaled between US$1.22-1.35 trillion.
The PERI report also recognized trade misinvoicing as an important mechanism for capital flight, using data from international debt statistics and the International Monetary Fund’s Direction of Trade Statistics database to estimate a loss of US$1.4 trillion in capital flight. Both the PERI and GFI reports reveal massive capital outflows from Africa resulting from trade misinvoicing- outflows which greatly outweighed what Africa received in the form of aid or foreign private investment over the same period.
Sustained capital flight slowly erodes the tax base of a country in multiple ways. First, shifting capital abroad switches the form from the domestic currency to a foreign one. This increases the supply of the domestic currency on currency markets, thus decreasing the value of that currency relative to others on global currency markets, hurting its exchange rate. It also contributes to the problem of low domestic savings rates, which in turn undermines the ability of governments to scale up public investment and to engage in deficit spending on needed public goods. Less public investment within an economy means less money is available for hiring new workers or increasing production (real GDP). Therefore, capital flight drains an economy through weakening the value of a country’s currency, hurting the domestic banking sector, undermining public investment and the ability of governments to increase real GDP. This has been the case with many African countries for the greater part of a century. As a region held back by high levels of capital flight, it is no wonder that most African nations missed their Millennium Development Goals during the 2000-2015 period.
A Growing Number of Efforts to Reduce Capital Flight
Addressing capital flight requires the cooperation of both developing and developed countries in closing down the international systems that absorb illicit financial flows from Africa. The PERI report noted: “The acceleration of capital flight over the past two decades suggests a need for deep investigation into the structural factors of this phenomenon not only at the origin in search of push factors, but also at the destination to identify potential pull factors.” This means there is a critical role for advanced economies and international institutions to play in addressing the problem of capital flight from Africa.
Specifically, since much of this money is sitting in bank accounts in developed countries and secrecy jurisdictions, developed countries must take concrete steps to reduce such clandestineness and improve transparency and accountability. Additionally, developed countries must cooperate at the international level to address and reduce tax evasion by multinational corporations.
Fortunately, the problem of capital flight is increasingly recognized by the international community and there are a growing number of possible solutions. Such initiatives include proposals to increase trade fraud penalties and to establish “beneficial ownership” legislation so the actual owners of companies are known to authorities. A growing number of countries are adopting the anti-money laundering recommendations of the Financial Action Task Force and signing onto the Addis Tax Initiative, which will all help to prevent capital flight from African nations.
For African governments, a comprehensive list of policy recommendations to reduce capital flight was published in 2018 by the United Nations Economic Commission for Africa (UNECA). In the report, UNECA proposes that governments require multinational corporations to provide comprehensive reporting on their operations, indicate disaggregated financial reporting on by-country or by-subsidiary bases; prepare cost-benefit analyses before allowing them to invest in a country; and that African countries should join voluntary initiatives, such as the Extractive Industries Transparency Initiative. It also proposes that African governments should provide training to empower investigators responsible for combating IFFs; establish greater inter-agency coordination between revenue authorities and ministries of finance in developing countries to build capacity in this area and strengthen transparent procurement procedures.
Capital Flight is both an African and an International Problem
Capital flight is a serious concern for all governments, both developed and developing, as it depletes revenue collections, undermines development initiatives and hinders effective governance. The data increasingly shows that the narrative of Africa as a poor recipient of capital obscures the reality that Africa in fact acts as a net creditor to the rest of the world, and that this is not just an African problem – but rather responsibility lies with both African and developed countries. GFI supports the recommendations listed in UNECA report, and urges governments in Africa, in the advanced economies, and international institutions to implement them. The injustice of the poorest countries in the world sending capital to the richest countries cannot be allowed to continue.
Source Global Financial Integrity by Ben Lorio
Creating financial mileposts at regular intervals will help keep one alert and focused
Wouldn’t it be nice to have a life without money worries – a life, where the money is aplenty and even major money hurdles don’t disrupt our lives? This is what financial freedom is all about. Money may not buy happiness, but it can surely buy one freedom. Well, to achieve this utopian financial independence, one needs careful planning. Financial freedom in general means having adequate savings, investments, and cash on hand to pay for the lifestyle we want for ourselves and our families without being obsessed by bringing in a certain amount each year.
Today, attaining financial freedom is an aspiration for many people. When one is financially independent, one has options. But, too many of us fall short of reaching that goal. We are laden with ever-increasing debt, financial emergencies, reckless spending, and other issues that foil us from reaching our goals. However, this Independence Day, one can surely start working their way towards financial freedom with these handy tips:
First, set life goals. Lack of a goal makes the desire for financial freedom too vague. The more specific one’s goals are, the higher is the probability of realising them. Creating financial mileposts at regular intervals will help keep one alert and focused.
Second, make a budget. Making a monthly budget and sticking to it is the best way to guarantee all bills are paid and savings are on track. It is also a monthly routine that reinforces your goals and boosts resolve against the enticement to overindulge.
Third, start investing immediately. Investing is the best way that one’s money can grow exponentially over time. But, time is a major factor to achieve meaningful growth. An online investment account makes it effortless for one to study how to invest, create a neat portfolio, and make weekly or monthly contributions to it automatically.
The next step would be to watch one’s credit. One’s credit score decides the entire financial history of a person. People with reckless financial habits end up paying more interest creating a long-term impact on their financial well-being. This makes it important to get a credit report at regular interval to make sure there is no incorrect information sullying one’s good name.
Another good thing would be to keep learning. One should review all valid changes in the tax laws each year to make sure all alterations and deductions are made the most of. One should try and adjust their investment portfolio in sync with the latest development in the finance sector.
In addition to all above, getting a financial advisor – could be a friend, family, or a professional expert – is highly recommended. A financial advisor can educate, guide and help a person to amass a decent amount of wealth which will get one a step closer to financial freedom.
And last but not least, it is vital to take care of one’s health. Ill-health often makes insurance premiums soar. It may also lead to early retirement. This may hamper the saving and investment pool obstructing the road to financial freedom.
Not only are financial freedom and building extraordinary wealth commendable goals, but they are also attainable. However, working one’s way towards financial freedom will not happen in a jiffy. But, with each step, one can reduce financial stress and improve the quality of life.
Source DNA India by Arun Thukral (MD & CEO, Axis)
The cost of sending money through banks and money transfer operators is high in Africa at an astronomical rate. On average, sending an equivalent of $200 costs 9.3 percent of the value transferred. This is the highest remittance rates anywhere in the world according to the world bank’s 2019 report. In contrast, the use of cryptocurrency based fintech firms such as Bitpesa cuts the cost by 90 percent.
Exorbitant Bank Charges On Remittance
The amount sent to Africa by Africans abroad is estimated to be about $46 million to support families in their countries. Most of the money sent is used to cater for education, food, clothes among others. Meanwhile, a lump sum of the payment is being taken by the financial institutions as transfer fees.
The world bank notes that the bank is the most expensive agent for sending money back to Africa at 10.2 percent, followed by most transfer operators at 7.7 percent and post office at 5.5 percent. This is very much costly in comparison to the sustainable Development Goals target of cutting financial transfer costs to within 3% of total transaction value by 2030.
Cryptocurrency-Based Remittance In Africa
While the financial institutions have been charging Africans exorbitant price for Remittance, crypto-based remittance has become a solace for Africans, because of its low fees, efficiency and speed. One of crypto-based Remittance platforms offering solace to Africans is Bitpesa.
Bitpesa was created in 2013 by an American political science graduate Elizabeth Rossiello. The firm initially focused on facilitating bitcoin-supported cash transfers between citizens of the U.K. and Kenya. However, Bitpesa now has operations in eight African countries: the Democratic Republic of the Congo, Ghana, Kenya, Morocco, Nigeria, Senegal, Tanzania, and Uganda.
According to Stephany Zoo, head of marketing at Nairobi-based Bitpesa, he stated that the firm enables people in Africa to send or receive money from around the world at a fraction of the cost charged by traditional agents.
Zoo explained that “We process our remittance payments with a blend of traditional and personal insurance such as pooling, as well as using cryptocurrency. Our fees are 1 to 3%, so it’s significantly lower than those mentioned in the World Bank report. A lot of our clients are money transfer operators that actually move the money, and we are the underlying technology or software behind what they do as well as being their foreign exchange provider.”
Other crypto-based Remittances or related platforms offering Africans solace include Uganda’s Coinpesa which is primarily a crypto exchange and does not directly engage in the remittance business, but process trades that originated as Remittance.
Also, there is Sure Remit in Nigeria; it charges between 0-2% for non-cash remittances. The company claims to host a network of hundreds of merchants throughout the world and uses an in-house token, RMT. In southern Africa, Wala utilizes its digital coin called Dala to help users send money, buy airtime and data, pay bills and school fees in several countries at no cost.
The world bank projects the African Remittance market to grow by 4.2% in 2019 and 5.6% in 2020. Bitpesa’s Zoo is optimistic crypto-based Remittance is going to claim a share of the market.
Source BTCNN by Babatunde Modupe
From artificial intelligence to mobile applications, technology helps to increase your access to secure and efficient financial products and services.
Since fintech offers the chance to boost economic growth and expand financial inclusion in all countries, the IMF and World Bank surveyed central banks, finance ministries, and other relevant agencies in 189 countries on a range of topics and received 96 responses.
A new paper details the results of the survey alongside findings from other regional studies, and also identifies areas for international cooperation—including roles for the IMF and World Bank—and in which further work is needed by governments, international organizations, and standard-setting bodies.
Foremost in all countries’ minds is cybersecurity.
Some interesting and startling trends emerged in the survey: foremost in all countries’ minds is cybersecurity.
1. Cybersecurity and data protection risks recognize no boundaries with spillovers across sectors and countries, and governments are working hard to get a handle on the issue. Awareness of cyber risks is high across countries and most jurisdictions have frameworks in place to protect financial systems. Most jurisdictions—79% of those with higher incomes according to the survey results—identified cyber risks in fintech as a problem for the financial sector.
But evidence from the survey suggests that only a third of jurisdictions have analyzed the technological interdependencies between networks, systems, or processes within the financial sector or looked at concentration risks among big technology providers that could threaten financial infrastructure. A high proportion—83 percent of high-income countries—report some monitoring of cyber risks related to third-party service providers, but only half of lower-income jurisdictions have specified minimum requirements.
2. Asia is ahead of other regions in many aspects of fintech. In China, the massive scale of its markets and a regulatory “light touch” in the early years supported fintech development, with China emerging as a global leader. In India, large-scale adoption of mobile payments and increase in money transfers have driven growth in the mobile payments.
But the region’s use of fintech exhibits large gaps between the rich and poor, men and women, and rural and urban areas.
3. Sub-Saharan Africa is a global leader in mobile money innovation, adoption, and usage. The region leads the world in mobile money accounts per capita (both registered and active accounts), mobile money outlets, and volume of mobile money transactions. Close to 10 percent of GDP in transactions are occurring through mobile money, compared with just 7 percent of GDP in Asia and less than 2 percent of GDP in other regions. Across Africa, the adoption and use of technology in the provision of financial services is changing the way in which financial service providers operate and deliver products and services to their customers.
4. Europe is not unified when it comes to fintech adoption. Given high mobile phone and internet access, the potential is high for fintech to improve access to, and usage of, payments and other financial services in Europe. The modernization of the EU’s data policy frameworks has helped to clarify rights and obligations in the data economy, which is an issue that many countries must address. However, there are important regional differences in the adoption of digital finance, the prevalence of cash-based payments, account ownership and usage, and savings and credit in the region. For example, a considerable gap also exists between the United Kingdom and the rest of Europe—that country being significantly ahead of the rest of Europe both in terms of fintech innovation and investment.
5. Digital currencies backed by central banks could become reality. The survey reveals wide-ranging views of countries on central bank digital currencies. About 20 percent of respondents said they are exploring the possibility of issuing such currencies. But even then, work is in early stages; only four pilots were reported. The main reasons cited in favor of issuing digital currencies are lowering costs, increasing efficiency of monetary policy implementation, countering competition from cryptocurrencies, ensuring contestability of the payment market, and offering a risk-free payment instrument to the public.
Source IMF Blog by Tobias Adrian and Ceyla Pazarbasioglu