Speaking on a panel at the 2019 MIT Bitcoin Expo, Bitcoin Core developer and applied cryptography consultant Peter Todd says Bitcoin, the world’s largest cryptocurrency, is really competing against Western Union – not Visa or Mastercard.
“When you look at the history of Western Union, it’s mostly a history of dodging regulations all around the world and paying billions of dollars worth of fines and fees, and so on, to make this happen. Of course, we don’t recognize that – because we just go see the friendly Western Union agent. But that’s what’s actually happening in the background there, and it’s a constant fight for them – ‘how do we keep running in these crazy countries?’ – that’s actually better competition to Bitcoin.”
Todd, who has also worked for enterprise blockchain solutions leader R3 and is partially responsible for the design of its global payments platform Corda Settler, says the reason why he’s interested in cryptocurrencies is freedom.
“The big picture is that if you can control people’s use of money, you essentially have probably even more control than if you can control their use of speech.”
In countries where regulations are lax, Todd says Visa and Mastercard don’t stand a chance. But in the areas where Visa and Mastercard excel at facilitating consumer purchases, Todd declares them the undisputed winner.
“Visa and Mastercard already won in many respects. When you’re talking about the sort of things that they already compete well in, Bitcoin doesn’t have a hope. Or if you’re talking about the sort of thing where Bitcoin has a chance at competing in, where you have regulations restricting the flow of money, the Visa and Mastercards of the world have a very difficult time of competing.”
In addition to people and business owners trying to control their money, Todd says there are banks grappling with regulations and the flow of capital.
“There’s lots of banks who want very, very hard to figure out how to go and hide things from regulators while still abiding by the regulations. And a great example of this is, well, if I have a bank that does business in two countries, I want to assure that I meet my regulatory demands – both of them simultaneously – without giving regulators in another country data that I didn’t absolutely have to.”
On a recent episode of the What Bitcoin Did podcast with host Peter McCormack, Todd illustrates why centralized payment platforms are such a palpable threat. In the retail sector they can control the flow of money, thereby effectively censoring and controlling content, and restricting ideas.
By allowing creators to fund themselves, Bitcoin is a hedge against dominate platforms.
“The fact of the matter is companies like PayPal, MasterCard, Visa, are able to restrict freedom of speech very effectively. Not as effectively as they could without safe things like Bitcoin. But, the amount of control they have over what content gets produced is very scary.
Where deplatforming ends up is people being able to restrict speech, because they can say, ‘I don’t like what you’re publishing, and we’re going to cut off your money.’ And, you can’t, for instance, do journalism without access to a flow of money to go pay people to do stuff.”
As for new coins from legacy players in banking, social media and e-commerce, such as JP Morgan’s JPM Coin or a FaceCoin from Facebook, Todd sees these types of innovations as nothing more than political and regulatory inventions.
“The difference between JPM Coin and PayPal isn’t that big. PayPal – when you look at the early history – it very clearly wanted to create a coin, but they didn’t have the right political environment to do it. So instead, they called it a ‘payment service.’ But the tech between PayPal and JPM Coin is roughly the same. The APIs can look roughly the same. You might have a bit of crypto, and change a few auditing things, and maybe change some of the APIs, but it’s really not that different.”