Cryptocurrency has become increasingly popular, with about 18 million Americans reportedly investing in it, according to the Federal Reserve. Following the election of a pro-crypto president in the U.S., the appeal of digital currencies like Bitcoin has surged.
Advocates argue that crypto disrupts traditional capitalism by bypassing traditional banks and offering quick profits along with a futuristic appeal. Early investors have made substantial gains, some even becoming millionaires and billionaires.
Currently, there are around 100,000 crypto millionaires, and the rise of crypto wealth has fueled lobbying efforts, such as those led by Fairshake, the largest crypto lobbying group in the U.S.
They claim credit for helping elect 253 pro-crypto candidates during the recent election. However, the question remains: Is cryptocurrency an ethical investment?
As a business professor who studies the impact of technology, I’ve identified three key ethical concerns surrounding cryptocurrency that investors should consider.
The Three Ethical Concerns
The first concern is cryptocurrency’s significant environmental impact, particularly the energy consumption associated with Bitcoin. Bitcoin mining, the process by which new coins are created, requires vast amounts of electricity.
Tens of thousands of computers in large data centers use an enormous amount of energy, contributing to carbon emissions and environmental degradation. In fact, Bitcoin alone consumes as much electricity as the entire country of Australia, making up around 0.9% of the world’s electricity demand.
The second issue is the use of cryptocurrency in illegal activities. Unregulated and anonymous, cryptocurrencies are often used by criminals for fraud, tax evasion, human trafficking, and ransomware attacks.
These illicit activities have caused significant harm, with ransomware attacks alone costing victims around $1 billion in extorted cryptocurrency payments.
Unlike traditional banks, which are required to enforce anti-money laundering measures, crypto transactions can be anonymous, making it easier for criminals to operate outside the law.
This lack of oversight means that anyone involved in the crypto ecosystem could potentially be seen as complicit in these illegal activities.
The third ethical concern is the predatory nature of some parts of the cryptocurrency market. Without regulation, many smaller cryptocurrencies and initial coin offerings (ICOs) have been accused of taking advantage of uninformed investors.
A notorious example is Bitconnect, a now-defunct cryptocurrency scheme that promised high returns to investors. It turned out to be a Ponzi scheme, where profits for early investors were funded by money from new investors.
The founder of Bitconnect, Satish Kumbhani, was indicted but remains at large. This predatory culture is another troubling aspect of the cryptocurrency world.
The Myth of Inclusion
Another common myth associated with cryptocurrency is its supposed ability to empower the unbanked, especially those in developing countries who don’t have access to traditional banking services.
The idea is that crypto could provide a way for people in these situations to send and receive money more easily and affordably.
However, this narrative doesn’t fully hold up in practice. In reality, the process of converting cryptocurrency into local currencies often comes with high fees, negating the potential benefits for the poor.
Moreover, the distribution of crypto wealth is highly concentrated among the wealthy. A 2021 study found that just 0.01% of Bitcoin holders control a staggering 27% of its total value.
Instead of democratizing finance, cryptocurrency has largely benefited the creators, early investors, and developers who hold significant power over the direction of these digital currencies. In many ways, this mirrors the concentration of power that crypto was meant to challenge in the first place.
Efforts Toward Ethical Improvements
Despite these criticisms, the crypto community has taken some steps toward addressing its ethical issues. For example, in early 2021, the Crypto Climate Accord was established, with over 250 crypto firms joining efforts to reduce the environmental harm associated with crypto mining.
In 2022, Ethereum made a significant change by transitioning to a less energy-intensive mining process known as “proof-of-stake,” reducing its energy consumption by over 99%. While this was a commendable move, Bitcoin, the largest cryptocurrency, has not followed suit, continuing to consume vast amounts of energy.
Regulators have also started to take action. In 2023, authorities in the European Union, the UK, and the U.S. began implementing measures to regulate the crypto market and curb illegal activities. Additionally, in January 2024,
U.S. regulators approved exchange-traded funds (ETFs) that allow smaller investors to trade crypto in a more controlled environment.
However, these moves raise questions about the ethical implications of normalizing crypto trading.
For example, the Nikko Ark Positive Change Innovation Fund, which had a remarkable 68% return in 2023, made significant investments in crypto.
The fund’s manager justified this by claiming crypto helps provide financial services to the unbanked, despite the underlying ethical issues.
The Ethical Dilemma for Investors
For ethical investors, cryptocurrency presents a difficult dilemma. They may choose to divest from Bitcoin, the primary offender in terms of environmental harm, or opt for other cryptocurrencies that strive to minimize these negative impacts.
However, even so-called “ethical” crypto investments still come with hidden ethical problems. Many ethical funds, such as those focusing on environmental, social, and governance (ESG) factors, may avoid investing in petroleum companies but still invest in crypto, which presents a contradiction in their ethical stance.
In conclusion, while cryptocurrency offers the potential for high returns and presents an exciting, futuristic appeal, its environmental impact, association with illegal activities, and predatory practices raise significant ethical concerns. Investors need to carefully weigh these factors before deciding whether crypto is a morally sound investment.
Join Kenyan Gen z and millennials official 2025 WhatsApp Channel To Stay Updated On time the ongoing situation https://whatsapp.com/channel/0029VaWT5gSGufImU8R0DO30
Tiktok – https://www.tiktok.com/@news.hub88?_t=ZM-8sz45qJid3V&_r=1
