The puzzle of “crypto-colonialism” | Pete howson

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Ethiopia suffers a humanitarian disaster. After months of armed conflict, the roads and bridges across Tigray province are in ruins. Electricity and telephone lines were cut. Only 15% of Ethiopians have internet access at best.

With a civil war in full swing and critical infrastructure in tatters in remote areas, it may seem like an odd time to start the country’s digital revolution. But the developers behind the Cardano cryptocurrency, IOHK, have announced that the US tech company will help Ethiopia rise from the wreckage. The Colorado-based company has been around for more than four years planning blockchain-based citizen identification systems and school records, as well as various supply chain management tools.

Pete Howson is a senior lecturer in international development at the University of Northumbria, where he studied trade-offs in “crypto-donation” efforts.

The initial plan is for a Cardano app to be used to digitally track student grades and academic performance across the country. The developers then hope to expand the system by incorporating an Ethiopia-wide cryptocurrency payment system, before connecting the entire African continent with the Cardano infrastructure. The platform could potentially allow access to crypto or DeFi (decentralized finance) loans.

With COVID-19, war, famine and a large part of the Ethiopian population already living far below any reasonable conception of a life with dignity, said a UN special rapporteur on extreme poverty, the project might seem like a cake-in-the-sky idea. The company’s optimistic investors believe the opposite. The announcement of the deals pushed the Cardanos ADA token to record price levels in May.

Blockchain projects can do very little to mend roads and build strong political institutions in places like Ethiopia. Innovators are not attracted to fragile states because they want to address these issues. Poverty and corruption are the ideal conditions for entrepreneurs to explore opportunities to extract resources from vulnerable communities.

Cardanos is also looking for opportunities in El Salvador. Last month, the country’s President, Nayib Bukele, and 27-year-old crypto investor Jack Mallers of Chicago proclaimed bitcoin the Central American country’s new official currency. Starting in September, all Salvadoran vendors with an internet connection will be breaking the country’s Bitcoin law if they don’t offer crypto payment options.

Mallers presented his big bitcoin experiment just weeks after the United States threatened to withdraw aid to El Salvador amid deep concerns about civil liberties, extrajudicial killings and human rights abuses. Despite claims that Bitcoin will help poorer Salvadors by banking the unbanked, research from the University of Northumbria in the UK on ‘Blockchain for Good’ projects in the Global South suggests its benefits economics, including land, user data and others are the backbone of these experiments. Critics have a name for this type of extractive experimentation: crypto-colonialism.

It works like this: In the minds of right-wing economists like Milton Friedman, blockchain innovators seek populations suffering from debt crises, war, climate disasters, etc. to impose and incubate new crypto-economic ideas. For the host government, which struggles to deliver social services and infrastructure projects while suffering from chronic underinvestment, its lack of tax revenue and regulations is the real headache. Cryptocurrencies and blockchain services often make these headaches worse, not better.

People can be easily disciplined just with code, not cannons

Puerto Rico serves as an example. After Hurricanes Irma and Mara devastated the island, cryptocurrency investors set sail to build a new crypto-libertarian Jerusalem, also known as Puertopia. The island quickly became a hotly contested sandbox for cryptocurrencies. For Jillian Crandall, a researcher at the Rensselaer Polytechnic Institute, these crypto-colonialist projects could be called disaster capitalism.

Supporters of the Ethiopia-Cardano deal suggest the partnership will do wonders for corruption and transparency. Our research suggests a more dystopian perspective.

Through the use of smart contracts, centralized monitoring capabilities and automated conditions can be encoded into payment platforms. Individual citizens, and even entire populations, can lose their economic sovereignty, while tech companies and central governments track and manage how citizens’ funds can be spent.

John OConnor, director of Cardanos Africa, said the company’s crypto experiments are making a lot more noise in poorer parts of Africa, compared to marginal improvements for countries like the UK. , consistently rejected by the public because of espionage concerns.

This is not the case in the countries of the South. Global tech companies, with the help of autocratic politicians in financial pickles, are forcing crypto-surveillance systems without public debate on entire populations. This includes refugees and other vulnerable groups. In Tigray, where local interests are squarely opposed to the Ethiopian government, unruly populations can be easily disciplined. Just with code, not cannons.

Blockchains cannot rebuild roads, nor end sectarian violence, famine or natural disasters. When countries like Ethiopia have to recover from war, they ultimately need support to rebuild strong democratic infrastructure and institutions, including effective legal and fiscal systems. Whimsical libertarian experiments with cryptocurrencies, benefiting only crypto-rich investors elsewhere, should go for another sandbox.

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