Cryptocurrencies' role in supporting humanitarian efforts opens door to more nuanced questions, says Ether Capital CEO
Across most of the world, cryptocurrencies have largely been talked about either as a new asset class to include in investment portfolios, a way to make financial transactions away from the eyes of the taxman, or a convenient scapegoat for fraudsters to part people from their hard-earned money.
But according to Brian Mosoff, CEO at Ether Capital, the ongoing tragedy in Ukraine has brought forward a conversation that’s been 13 years in the making.
“We have not had conversations at the government level about what this asset class is going to be, and how it fits into wider society,” Mosoff told Wealth Professional. “Much of the conversation to date has been around how to regulate platforms, what appropriate registrations would be, what appropriate oversight would exist, which agencies would be involved. But that's happening at the regulator level.”
The focus on regulation is hardly surprising. For much of its history, Mosoff says crypto has had a bad rap from people outside the community pointing out how it’s used to fund illicit activities, or evade taxes. Those negative characterizations, he argues, has meant talking about cryptocurrencies has tended to leave a “tainted taste in people’s mouths.”
But as the tragedy of the Ukraine conflict unfolded, a large number of donations have been sent to support humanitarian and relief efforts on the ground. Just by copying and pasting an address from the blockchain into their cellphone wallets, Mosoff says, people with crypto assets have been able to provide financial support in a way that’s never been seen before.
“This shows that the technology itself is neutral. At its core, at the protocol level, it doesn't have a political agenda or whim,” he says. “It’s a really fantastic thing to see people realizing that it can be used in a different way.”
In spite of the volatility associated with crypto, Mosoff says crypto donations to Ukraine have poured in because the underpinning blockchain technology offers an alternative system of financial rails. That system, Mosoff argues, is more efficient as it’s free from the speed bumps and tollways associated with sending money through traditional wire transfers and the SWIFT network.
“Think about the SWIFT network and how banks and wire transfer services work today were originally put together. That system was never built from the ground up,” Mosoff says. “Those things just weren’t contemplated in a 24/7 world of hyperglobalization. So what you have with the traditional financial system is a duct-taped patchwork system of rails that’s very dated.”
The timeframe typically quoted for international bank transfers is one to five business days. While the experience may vary depending on the institution someone is working with, banks typically ask for specific information including the name and address of the recipient’s bank; the recipient’s IBAN (International Bank Account Number); the BIC/SWIFT code of recipient’s bank; the reason for the transfer; and how much and in what currency the transfer will be done.
Beyond that, the user or the recipient may have to incur large fees to get the transaction done. If the money has to go through multiple intermediary banks to reach the recipient, it can add several more days to the process; the sender can ask to put a rush on it, but that will involve even more fees.
“When you think about this in the context of how email works, and it's just instant and free anywhere in the world, it sounds so strange,” Mosoff says. “I think people are waking up to the fact that crypto was built as an internet-native tool.”
As a wider swath of society starts peeling back the layers of crypto assets’ capabilities, he believes it sets the stage for more important conversations. How will people feel about digital bearer assets? Will they be comfortable with the idea of citizens with different political agendas being able to move money globally through self-hosted wallets, without choke points or third parties to weigh in?
“Some of those conversations had been happening even before. But I think that the situation really puts a fire under people to think about these things,” Mosoff says. “And I'm hopeful that it's not just governments and regulators who are going to opine on this, that there will be appropriate consultation with industry to figure out how to balance out what are the risks and rewards if we get this right.”
