Education
In defense of crypto: Why digital currencies deserve a better reputation
Crypto’s mainstream acceptance is almost already here, but many people still have unfounded fears we have to overcome.
Ever since its inception and throughout its turbulent journey toward mainstream acceptance, crypto has elicited both enthusiasm and trepidation in equal measure. After the unfair battering it has received over the years, the time has come to defend digital currencies.
Unfortunately for crypto, first impressions count. Bitcoin (BTC) initially gained a tawdry reputation in its early years as the currency of choice for illicit activities — favored by dark web users, ransomware hackers, drug traffickers and money launderers worldwide.
But, the world has changed since the first Bitcoin was mined in January 2009. There are now more than 18 million of them in circulation, and more than 90,000 people have $1 million or more stashed away in Bitcoin, according to cryptocurrency data-tracking firm Bitinfocharts.
There are, indeed, signs that crypto is, at last, gaining mainstream acceptance. Just last year, El Salvador declared Bitcoin as a legal tender in September and in October, the first Bitcoin futures-linked exchange-traded fund (ETF) in the United States began trading on the New York Stock Exchange. Payments giant Visa also launched a Global Crypto Advisory Practice in December, helping financial institutions advance their own crypto journey.
There are even talks of crypto becoming a medium of exchange in Afghanistan, offering a very real example of crypto enabling financial transactions in a situation where the monetary system itself is breaking down.
Related: How are Afghans using crypto under the Taliban government?
The obstacles and barriers
Despite these success stories, nagging doubts persist among the public and objections have been expressed by politicians who fear a decentralized currency that puts the general public in charge of their own money. China declared crypto transactions illegal in September, citing concerns about gambling and money laundering. Politicians around the world have expressed alarm about its potential to transform the established dynamics of the existing financial ecosystem.
The underlying factor behind all of this is fear and recent research suggests it could be a fear of the unknown. According to a national survey commissioned by money app Ziglu, almost a third (31%) of British people surveyed are curious about investing in crypto, yet 62% of those included have held back from buying any because they do not understand the market. As a sign that cryptocurrency is gaining legitimacy in the eyes of the public, however, the survey also found that b
Bitcoin is now considered a smarter investment than property.
Now is the time to recognize that while there are inherent risks, cryptocurrency is also a force for good in the world. In an age of plummeting savings rates, this relatively new asset class offers all of us the opportunity to invest in crypto without traditional barriers that exist in traditional finance, no matter how much or how little money we have available.
Related: Stablecoin adoption and the future of financial inclusion
Some people do not even have a safe place to store their hard-earned cash. According to World Bank data, 1.7 billion people globally do not have a bank account. Many of us take for granted the ability to move money around through credit cards and bank transfers — sending large sums to our friends and family with a tap of our smartphones — but for the unbanked, this is not possible.
More than 80% of the world’s population do, however, own a smartphone, which is all they need to send crypto remittances across international borders. Crypto is boosting financial inclusion by giving millions of people with no access to platforms such as PayPal or Venmo the ability to transfer funds for mere pennies. It is also a good alternative for those who resent high bank fees since this new infrastructure, unlike the traditional payment rails, is not constrained by profit motivation.
Crypto’s advantages
Smart contracts can replace services from banks, money transfer companies or legal services, while cryptocurrencies and digital wallets can provide flexibility such as credit for customers and financial sovereignty with no centralized entity required.
Crypto can also shield citizens from economic turmoil. Venezuela is a prime example where many citizens are already suffering high inflation and the impact of United States sanctions that also affect their banks. They are increasingly converting their wages into crypto and using the blockchain for money transfers and payments.
For developing countries, Bitcoin is an excellent way for society to eliminate corruption because the community can track any Bitcoin transaction in the public ledger when people use the cryptocurrency to transfer money.
Closer to home, crypto is also democratizing finance. There are low barriers to entry with no need for a broker or a high net worth. Anyone can invest and create wealth for themselves. As a result, people are learning about concepts such as annual percentage rates, lending and borrowing, and the history and purpose of money.
Crypto’s disadvantages
But, any defense of crypto cannot avoid the elephant in the room: crime. It has long been associated with fraud and ransomware, but the truth is that blockchain is the perfect system to thwart such criminal activity.
Related: Bitcoin can't be viewed as an untraceable 'crime coin' anymore
Cryptocurrencies are not anonymous, they are pseudonymous. The open ledger on which crypto lives and moves allows law enforcement to track and trace the flow of funds in real time, providing unprecedented visibility on financial flows. Criminals also need to convert crypto into fiat currency, creating opportunities to not only blacklist the wallet addresses but also proactively catch the criminals.
That is why, as in the Colonial Pipeline ransomware attack in the U.S.in June 2021, law enforcement was able to track and ultimately seize the ransom payment. That recovery was possible only because cryptocurrency was the medium of payment.
Related: Don't blame crypto for ransomware
The advantage blockchain has is that it’s tamper-proof. Through a process known as consensus, each transaction is verified by multiple parties independently. Entries are immutable, meaning they can’t be modified and can only be updated by adding an addendum.
We are advocating for a specialist unit within cybercrime law enforcement. Why is it needed? To have dedicated technical and human resources that can work proactively with corporations that have been breached with a ransom requested in crypto. It would be able to communicate and notify all crypto exchanges so that they can identify when and if the criminal wants to cash out on the exchange.
Another issue rightly raised about crypto is the environmental impact: The enormous amount of electricity required to mine proof-of-work currencies such as Bitcoin requires warehouses full of powerful computing rigs constantly running.
However, this is already changing. Right now, more than half of Bitcoin miners use sustainable energy. A Bitcoin mining operation opened northeast of Niagara Falls on the site of the last working coal plant in the state of New York, using cheap hydroelectric power to run its rigs. Meanwhile, El Salvador’s President Nayib Bukele has announced an even more creative plan to use geothermal energy from the Conchagua volcano to power its Bitcoin City project.
Cryptocurrency’s journey to mainstream acceptance is almost complete. Therefore, now is the time to overcome our often unfounded fears and to embrace the financial freedom, security and convenience it offers.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Ian Taylor is the executive director of CryptoUK, an independent industry body that exists as a cohesive, credible voice for the evolving United Kingdom crypto industry. Having spent 20 years in investment banking, he has held many senior roles across trading, treasury and risk management, and is still involved with a major global bank. As executive director of CryptoUK, he has built a community of more than 100 of the most influential industry participants and campaigns for a fit-for-purpose regulatory framework in the U.K., Europe and beyond.
Crypto education can bring financial empowerment to Latin Americans
Crypto education could be key to promoting financial empowerment and increasing mass adoption across Latin America — if we do it right.
In October 2021, it was estimated that approximately 15% of the world’s supply of Bitcoin (BTC) was in circulation in Latin America. According to a recent report released by Crypto Literacy, however, 99% of Brazilian and Mexican respondents failed a basic assessment on crypto literacy. Crypto adoption is well underway across the region — on the rise even — but, people still lack a basic understanding of its underlying technology and use cases.
When this lack of basic crypto literacy is considered in the context of developing markets across Latin America, where the use cases for blockchain technologies hold real significance, it becomes a serious concern.
Latin American populations who lack crypto literacy risk missing out on stablecoins that can offer protection against Latin America’s rapidly rising inflation. As well as decentralized applications (DApps) that provide populations of unbanked individuals access to financial services from their mobile devices. In countries where remittances are a major facet of the economy, cryptocurrencies offer a faster and cheaper alternative for sending funds across borders.
So, how can we help Latin America’s most underserved populations access this life-changing technology? Education.
Related: Mass adoption of blockchain tech is possible, and education is the key
Unlocking mainstream adoption through education
Education has the potential to address three key obstacles preventing mainstream crypto adoption: financial literacy, trust and safety.
Financial literacy
Financial literacy, or lack thereof, does not just stand as a barrier to crypto adoption: It stands as a barrier to traditional bank adoption as well. Across Latin America and the Caribbean, nearly 50 percent of the population is unbanked as of August 2021, lacking access to a bank account or other financial services. In addition to living far from financial institutions, many individuals cite an absence of trust in institutions as a reason for remaining unbanked. Where there is little trust, there is often a lack of understanding.
Related: Decentralized finance may be the future, but education is still lacking
Trust
Speaking from personal experience, it’s not rare in Mexico to hear stories of parents recommending that their (adult) children exchange their savings for United States dollars and hide it away in a safe rather than trusting those earnings with a financial institution. By building financial literacy both around broad financial concepts and more concentrated blockchain-related concepts, we can inspire greater trust in financial institutions as a key pillar for promoting mainstream adoption.
Safety
The trust that education garners is more than just trust in financial institutions. It’s also trusting yourself: When people don’t understand the institutions and tools with which they’re interacting, those individuals are more likely to make risky financial decisions. And, they know that. Education can serve as one form of a safety net, teaching individuals which regulations are and are not in place to protect them so they can understand how financial services fit within those regulatory frameworks.
Teach where it matters most
Crypto has the potential to change the world and those who understand it best will be at a huge advantage. Knowing the power that education creates, it’s important that the crypto world targets audiences strategically to perpetuate already entrenched inequalities. Remote and underserved communities, as well as those with less access to traditional education, should be at the forefront of the recipients of blockchain education.
For remote communities, we must create mobile-friendly educational opportunities so that individuals can access learning materials from their phones without needing to travel miles to the nearest city.
For those with less education, we must consider multimedia educational materials that circumnavigate the need for literacy without assuming high-level base knowledge.
For women, mentorship programs and role models are key to creating welcoming and inclusive spaces that are explicitly designed to bring women into crypto.
Related: Women's interest in crypto grows, but education gap persists
For global audiences, we should create resources in local languages — Spanish and Portuguese in Latin America — to ensure we reach the widest audience possible.
For everyone involved, we must avoid instituting financial barriers to education — trusting in the long-term gain of growing user bases through free and accessible education.
Blockchain technology and cryptocurrencies were built to break through the power structures of traditional finance. They have the potential to drastically improve financial inclusion and freedom in Latin America. So, it’s no wonder that crypto adoption is already on the rise. With mass adoption of such new technology, however, we face a new risk of leaving the most vulnerable populations behind. Education can solve this. Education can create trust in this rapidly-advancing technology and instill knowledge that enables individuals to interact safely with these new tools. Education can break the cycle of financial exclusion.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Abraham Cobos Ramírez is the crypto strategy manager at Bitso, the cryptocurrency platform operating in Latin America, with more than four million users. Abraham is a blockchain and business specialist with deep experience in the creation, development and implementation of technology solutions. Prior to Bitso, Abraham was part of the integration consulting team where he designed and implemented solutions to complex problems for projects in Mexico, the U.S., Costa Rica, Panama and Colombia.
Honey, I orange-pilled the kids! BTC children’s authors on learning about money
Three Bitcoin children's authors share the keys to teaching about Bitcoin and money, explaining why it's important to do so from a young age.
Bitcoin is for everyone. That includes teenagers, children, toddlers and even newborns.
When these kids grow up, they’ll use the Bitcoin (BTC) protocol, so it “makes sense to start to integrate Bitcoin into learning as early as possible.”
At least, that’s according to Scott Sibley, one-half of the couple behind the creation of the Shamory Bitcoin game and the ‘Goodnight Bitcoin’ children’s bedtime book. He joins a growing list of Bitcoin children’s book authors who care deeply about educating children on Bitcoin and money.
Sibley and his wife are firm believers that “kids can learn much faster, and earlier than most people think.”
It’s one of the reasons why they wrote their Bitcoin bedtime story, a tale for infants that riffs on the “plethora of “Goodnight” books (Goodnight Moon, Goodnight Baseball, etc.)” Incidentally, it also serves as a nice primer for their semi-educational game about Bitcoin mining, SHAmory.
The Sibleys noticed there’s a “product and content gap when it comes to fun ways for kids and adults to learn about Bitcoin,” and are bringing educational content that extends beyond the podcasts, books and long-form essays which Bitcoiners usually gorge upon.
“Financial education that includes Bitcoin is something that kids aren’t going to receive in most “traditional” schools. So right now it’s on Bitcoin parents to find ways to weave that education in at home.”
Chris and Frieda Bobay are the brains behind Bitcoin for Kiddos, the story of Bitcoin. They’re another couple passionate keen to impart knowledge into “children about money early,” so that “they will have the best opportunity to recognize it [uncorruptible money] when they see it.”
They told Cointelegraph:
“We wanted to expose our kids early to Bitcoin and broader concepts of money early so they are more comfortable using the technology and talking about it when they are older.”
They add that “money for most adults is a taboo subject, but it doesn't have to be.” In educating children about Bitcoin (and inherently, money) with books, it breaks down social barriers, unlocking “an incredible learning experience for the whole family.”
Michael Caras aka The Bitcoin Rabbi, author of Bitcoin Money: A Tale of Bitville Discovering Good Money, compliments the other authors’ musings about children and finance. He told Cointelegraph “it’s important that children learn about working for money, saving, spending responsibly, and also giving to charity.”
He notes the unintended advantage of teaching children about Bitcoin–it’s an “intro for adults,” too. Sibley explains: “kids, as well as the adults, will still be better off in the sense that we all have been exposed to and learned more about money, where it comes from, what makes it valuable, etc.” Sibley adds:
“These are all questions [about money] that most people probably go their entire life without thinking or learning about.”
Furthermore, given that “children don't have all the biases that adults have,” they might approach the decentralized monetary network with an open mind. The Bitcoin Rabbi expands the idea, sharing “children understand the digital aspect of Bitcoin because they are digital native.”
“Not having preconceived notions about how traditional money and banks makes it easier for them to see Bitcoin as real money.”
Ultimately, not only do the Bitcoin children’s books subtly teach kids (and their parents) about Bitcoin, orange-pilling them along the way; they also only help to break down an enduring taboo: talking about money.
Treasury to launch financial education initiative around crypto investments
More education and awareness for crypto asset investing “would be helpful” according to Treasury officials.
The United States Treasury Department is launching a new initiative to raise awareness of the risks involved in investing in digital assets.
The move comes as the asset class transitions from a niche market into mainstream investment according to a top Treasury official, potentially drawing in less sophisticated investors.
The Department’s “Financial Literacy Education Commission” is developing educational materials designed to inform the public how crypto assets operate and how they differ from traditional assets.
Treasury undersecretary for domestic finance, Nellie Liang, told Reuters that the target demographic is people that have limited access to mainstream financial services. She stated:
“We’re hearing more and more about investors and households who are purchasing crypto assets, and we recognize the complexity of how some of these assets operate.”
Liang added that it was an area where more education and awareness “would be helpful.”
Better education and financial literacy are obviously of public benefit, as there has been criticism that the focus from regulators to date on “protecting” consumers has actually led to the exclusion of disadvantaged communities from accessing crypto wealth-building opportunities.
Cleve Mesidor, founder of The National Policy Network of Women of Color in Blockchain, told Cointelegraph Magazine recently:
“If they were more focused on financial literacy and skills training and workforce training, that would be acceptable, but they are mostly focused on consumer protectionism.”
The new education division comprises 20 different agencies, including the Securities and Exchange Commission. The initiative may ease concerns that regulators have over the risks associated with crypto investing and could bolster their ongoing mission to protect investors from industry scams.
The Treasury Departmentappears to be taking a proactive approach to the problem, acknowledging that digital assets could offer additional benefits for cross-border payment or financial inclusion. Liang added:
“We’re just trying to raise awareness without trying to stamp out new technology and new innovation.”
This week, U.S. President Joe Biden is expected to sign an executive order summarizing the government strategy for dealing with crypto assets. Treasury Secretary Janet Yellen inadvertently revealed details of the order today, which will also direct the Justice Department, Treasury, and other agencies to study the legal and economic impacts of developing central bank digital currency (CBDC).
Related: Senator Warren seizes on fears over crypto and sanctions with new bill
Educational initiatives are not just limited to governmental departments. In January, basketball superstar LeBron James partnered with Crypto.com to launch an education initiative to teach students in his hometown of Akron about cryptocurrency and blockchain technology.
In February, Cointelegraph reported that P2P platform Paxful launched “La Casa Del Bitcoin,” a new educational and training center in El Salvador to provide free learning opportunities related to Bitcoin and cryptocurrencies.
The education drive also goes both ways as leading crypto firms have increased their lobbying on Capitol Hill over the past year. Companies such as Ripple Labs and Coinbase have been increasing efforts to “educate” policymakers on the industry and its underlying technology.
International Women’s Day 2022 focuses on bringing women to Web3
Initiatives are launched on International Women’s Day 2022 to bring more women to Web3, but will this be enough in the long-run?
At its core, Web3 is about regaining control from centralized online experiences, allowing creators to interact within peer-to-peer (P2P) ecosystems focused on music, film, artwork, fashion and other popular topics. This has also given rise to nonfungible tokens (NFTs) and digital ecosystems often referred to as the Metaverse.
Given the broad range of interests Web3 touches upon, the sector is not only attracting typical “tech bros” but has also captured the attention of many females looking to further build and develop the decentralized web. The movement of women entering Web3 has especially become apparent now, as the sector is still in its infancy.
Sandy Carter, senior vice president of Unstoppable Domains — a blockchain domain name provider — told Cointelegraph that Web3 today presents women with a phenomenal opportunity to make an impact since the space is still being developed. This isn’t always the case though, as Carter explained that before joining Unstoppable Domains in Dec. 2021, she was one of the few women executives at Amazon Web Services:
“As I transitioned to Unstoppable Domains, I was disappointed in Web2 and how much lack of diversity I found. Oftentimes 20% of the room would be women at conferences. It has also been shown that less than 5% of entrepreneurs in the Web2 space are female. This was mind blowing.”
International Women’s Day 2022
In order to help bring more women to the Web3 space, Carter said that Unstoppable Domains has partnered with 66 leading Web2 and Web3 companies to form a new initiative called “Unstoppable Women of Web3” — a diversity and education group focused on training the next generation of talent for the Web3 era.
Carter said that organizations supporting this initiative include major corporations like Google Cloud and Deloitte, along with blockchain companies such as Decentraland, BlockFi and Binance.US. “All partners have signed a pledge to feature work created by historically marginalized groups in at least half of all materials used for Web3 education,” said Carter.
While Carter believes that the Web3 space is starting to see an influx of women, she still thinks that the sector is often misunderstood and, therefore, intimidating. “I do think there is potential for women to enter Web3, but education is still required. For instance, if women look at a Web3 job offering and only meet certain criteria they may not apply. So, we are trying to break this down,” she said.
As a starting point, Carter noted that Unstoppable Women of Web3 will host a 24-hour Twitter spaces discussion on March 8 — International Women’s Day — to discuss Web3 related topics. She also noted that Unstoppable Domains will publish a list of 100 influential women in Web3 on International Women’s Day to demonstrate innovation in this new sector.
NFT marketplace Rarible is also hoping to drive women’s participation in Web3 by promoting female-empowerment projects during International Women’s Day this year. Masha Vyazemskaya, head of communications at Rarible, told Cointelegraph that while nonfungible tokens have created incredible opportunities for creatives, only 16% of NFT creators are women. “Even lesser known is the generation of female artists that have been involved in the NFT space since the early days, building the foundation of what the industry is today,” said Vyazemskaya.
Given this, Vyazemskaya explained that Rarible is placing a heavy focus on female-led NFT projects on March 8 to ensure that diverse voices are recognized. For example, Vyazemskaya explained that Rarible will be highlighting one of its first female NFT artists, Lirona. According to Vyazemskaya, Lirona started from scratch in the NFT space and has since launched her widely successful “#boiz” collection on the Rarible marketplace, which has garnered over $700,000 in sales. Vyazemskaya said:
“What’s amazing is that Lirona started on Rarible in early 2021 with her collections selling for 0.1 ETH and now they are selling for 20-30 ETH. This represents a very important journey for us, demonstrating how we work closely with artists and support their needs.”
Vyazemskaya added that Rarible will be launching “Metafemale” on March 8, which is an NFT collection that serves as a community for female creators and entrepreneurs in the space. “This project will also provide access to a private members club for female creatives in the metaverse,” she said. Vyazemskaya further remarked that Rarible will be promoting “Women Rise” this year, which is an NFT series supporting women activists, artists, scientists and coders.
Initiatives are needed
While initiatives to drive female participation in Web3 are notable, it’s important to point out that Web3 may be catering to a more diverse audience in general. For instance, Tegan Kline, co-founder of Edge and Node — the development team behind open-source indexing protocol The Graph — told Cointelegraph that NFTs are a use case within the Web3 umbrella that has reached the masses. “With this, it feels like many more women have gotten involved in the space. For that I am grateful, as it has been a huge need,” she said.
In addition to NFTs, Megan Kaspar, co-founder and managing director of Magnetic — a crypto and blockchain investment and incubation firm — told Cointelegraph that since 2013, she has been asked, “How do we bring more women into tech, crypto and blockchain?”
Kaspar explained that her answer applies to Web3, noting that more women will participate when dominant female verticals such as those related to beauty and fashion start to develop. “That’s happening now and it’s a contributing factor to all of the new female Web3 entrants over the past year and a half. The merge of fashion and blockchain has made this possible and that motivates me to continue contributing to the excitement emerging in metafashion,” remarked Kaspar.
While more women are taking an interest in Web3, Kline believes that awareness needs to be raised to ensure that women continue to enter the Web3 space early on:
“There is such a huge opportunity right now within Web3, it is similar to the early days of Wall Street or the early days of the tech boom. So many women were left out of both of those movements and I do not want to see the same in Web3. Now is the opportunity to get into a revolutionary movement that will likely change the world ahead of the masses.”
With this in mind, Kline said that she believes talks, panels and events are all important everyday initiatives to ensure that more women enter Web3. Echoing Kline, Jennifer Kim, founder and chief operating officer of SEUNwater — an Internet of Things water monitoring platform — told Cointelegraph that although Web3 may cater more to women, there still isn’t enough participation to see real traction.
In order to change this, Kim explained that she manages HBAR Foundation’s “Female Founders Fund.” According to Kim, The Female Founders Fund is a new program where qualified teams, led by women, may be eligible for funding, mentorship and guidance by the HBAR Foundation, which is Hedera Hashgraph’s grant program. “I hope that I can help women who want an extremely rewarding and fulfilling career in Web3. My passion for this industry is fierce and I want to share it,” mentioned Kim.
Connecting with other female thought leaders is indeed a critical element for growth within a new technology sector. Sonal Patel, operations lead at ConsenSys Mesh Baseline Research and Development — a unit developing technologies and contributions to the Ethereum Foundation — touched upon this.
She told Cointelegraph that her interest in Web3 began when she invested in crypto for the first time. Following this, Patel explained that she wanted to learn more about Web3 in her spare time, which led her to contribute to projects focused on decentralizing the web. In turn, Patel connected with some inspiring women like Eva Beylin, director of the Graph Foundation. Patel elaborated:
“The rise of decentralized communities, protocols and practices creates a strong need for operational integrity since the work is usually voluntary for those involved. Because of this, I've been formalizing and optimizing processes in the open source Baseline Protocol community to ultimately share and apply these innovative practices to contribute to the success and longevity of Web3 projects across the ecosystem.”
Community building
Although Web3 seems to be a promising new sector for diversity, some women already immersed in Web3 believe that a challenge moving forward is ensuring that women’s voices are continually heard.
To put this in perspective, Olive Allen — an NFT artist who recently burned her Russian passport in hopes of raising awareness and funds for the military conflict in Ukraine — told Cointelegraph that she entered Web3 in 2018. According to Allen, she created one of the very first NFT drops in 2019 known as “13 Dreadful and Disappointing Items.” While notable, Allen explained that many men took credit for this project shortly after it was launched. “Unfortunately, women have always been pretty much cut out from the history of any field be it science, technology or the arts. And, I feel it’s happening now,” she remarked.
As such, Allen believes that women’s voices often get lost in what she refers to as “the sea of crypto bro Twitter/Discord talk.” She added, “Don’t believe me? Tune in to the most popular crypto Twitter Spaces. I feel like ‘community’ doesn’t exist for women.”
Fortunately, understanding challenges early on may help improve Web3 as it matures. To this point, Carter noted that a main goal of Unstoppable Women of Web3 is to create ongoing community building. “Knowledge will be shared through Twitter Spaces, Discord, Telegram and in-person events, starting with a live event at South By Southwest 2022,” she said.
Denelle Dixon, chief executive officer and executive director of the Stellar Development Foundation (SDF) — a non-profit organization meant to support the growth of the Stellar Network — further told Cointelegraph that SDF is working with universities and educational institutions to organize NFT hackathons for women and nonbinary learners. “Inclusive education and community building are how we help bring more women and a broader group of users into Web3 that don’t see themselves reflected in the space nearly enough,” she said.
Are crypto and blockchain safe for kids, or should greater measures be put in place?
Age verification and educations around the implications of blockchain technology should be enforced for minors dabbling in the crypto space.
Crypto is going mainstream, and the world’s younger generation, in particular, is taking note. Cryptocurrency exchange Crypto.com recently predicted that crypto users worldwide could reach 1 billion by the end of 2022. Further findings show that Millennials — those between the ages of 26 and 41 — are turning to digital asset investment to build wealth. For example, a study conducted in 2021 by personal loan company Stilt found that, according to its user data, more than 94% of people who own crypto were between 18 and 40.
Keeping children safe
While the increased interest in cryptocurrency is notable, some are raising concerns regarding the ways those under the age of 18 are interacting with digital assets. These challenges were highlighted in UNICEF’s recent “Prospects for children in 2022” report, which examines the impact that global trends may have on children, including concerns around the mainstream adoption of cryptocurrency.
Melvin Breton Guerrero, policy specialist for UNICEF’s Office of Global Insight and Policy, told Cointelegraph that he wrote the section of the report on digital currencies. According to Guerrero, this portion of the document is highly relevant because the cryptocurrency industry is still developing and, therefore, requires child safeguards:
“We need to take steps to prevent harm to children that could occur by third-parties engaging with cryptocurrency or from self-inflicted harm. As such, we need to prepare children under the age of 18 for a future where cryptocurrencies and blockchain applications are going to be a part of everyday life, just as the internet is.”
Although there are no official safeguards in place for children when it comes to accessing crypto and blockchain applications, Guerrero explained that one of the most important factors to consider is age verification. “We need to make sure that minors are not wrongly engaging with blockchain applications or misusing cryptocurrencies,” he remarked.
Given the anonymity of cryptocurrency transactions, Guerrero is aware that anyone can set up and access a cryptocurrency wallet. He added that some online cryptocurrency exchanges don’t question the age of their users. “A child can transact using various crypto wallets, and nothing can be done,” said Guerrero.
While there are technically no age restrictions when it comes to crypto, most major cryptocurrency exchanges have Know Your Customer (KYC) requirements to ensure that users are 18 or older. For example, Coinbase’s website explicitly states that users must be 18 or older to access its services. Before this policy was implemented in July 2017, however, Coinbase did allow users who were at least 13 years of age to access its services with parental consent.
It’s also interesting to note that the United States-based cryptocurrency exchange Gemini offers custodial accounts for minors. A company blog post published on Jan. 25 explains that the new service is powered by EarlyBird, a Gemini Frontier Fund portfolio company, and allows parents to invest in their children’s financial futures.
Caleb Frankel, co-founder and chief operating officer of EarlyBird, told Cointelegraph that the offering is focused on providing access to digital assets so that parents can invest on behalf of their children:
“Each account is held by a parent or guardian over the age of 18. We believe that crypto is part of a balanced modern portfolio and are prioritizing the education of families and the next generation of investors as digital asset markets mature.”
Frankel added that EarlyBird is not only working with Gemini but also proactively with regulators as well to ensure the development of a safe, secure crypto ecosystem. While progress is still being made, Guerrero commented that it’s important to ensure new wallets are always created by someone of legal age. Even though children don’t initially create the wallets, Guerrero believes this is one solution to ensure they properly utilize crypto funds.
Unfortunately, other challenges can also arise when children gain access to cryptocurrency. For instance, 2021 saw an increase in crypto scams, and children inexperienced in the sector are likely to be more vulnerable. Larry Cameron, chief information security officer of the Anti-Human Trafficking Intelligence Initiative (ATII) — an organization focused on combating human trafficking by monitoring cryptocurrency transactions — told Cointelegraph that there are many risks to consider when children dabble in cryptocurrency:
“Namely, the scams and fake platforms are risks for minors. Online predators are experts at seeking out inexperienced people and exploiting them. Data breaches, identity theft or fraud can be accomplished in the child’s name without their knowledge. Children are also more likely to lose a private key, but this happens even to adults.”
As such, Cameron believes that acquiring digital assets will make children a target for criminals. “Until crypto exchanges collectively add more verification and authentication measures when opening an account, children’s privacy will be at risk. Ideally, anyone under the age of 18 would need to provide documentation from their parents as permission to open an account,” he remarked.
Is blockchain a double-edged sword?
In addition to concerns around cryptocurrency, blockchain technology may also pose unintended consequences for minors. For instance, Guerrero explained that blockchain could be harmful to children because information recorded is permanent and immutable, and this immutability could conflict with current regulations:
“The European Union’s ‘right to be forgotten’ appears in Article 17 of the General Data Protection Regulation, or GDPR. This means that children who volunteer their information when they don’t necessarily understand the consequences should have a right when they are of legal age to have that information deleted. But blockchain, by definition, does not permit the deletion of information. So, how can we protect children’s data in this case?”
Moreover, Guerrero pointed out that while blockchain applications could help migrant children have a portable identity to access goods and services, they could also be leveraged as a form of surveillance. Given these concerns, he emphasized that there must be a balance when harnessing the benefits of blockchain technology: “Having this balance is important, and the blockchain and crypto community must keep this in mind when building new applications.”
Fortunately, some organizations are making progress on this front. For example, while UNICEF has recognized the challenges associated with digital currency adoption and children, the organization is aware that blockchain technology can be used for good.
Sunita Grote, lead of the ventures team for UNICEF’s Office of Innovation, told Cointelegraph that her office has been exploring the use of blockchain through its venture fund. “This fund provides seed funding to test open-source solutions that have the potential to accelerate results for children. Blockchain is one of the technology areas that we are exploring,” she said.
Specifically, Grote believes that blockchain-based solutions allow organizations and individuals to rethink the way problems can be solved due to their enhanced transparency, efficiency in systems and better coordination of data across multiple parties. With this in mind, Grote understands the potential that blockchain can have when it comes to responding to the threats for children in the online environment. She shared that UNICEF’s venture fund recently invested in two startups developing open-source, AI-powered solutions to address digital risks to children.
On the other hand, Grote also understands that blockchain could increase children’s exposure risk and harm online: “Being online can magnify traditional threats and harms that many children already face offline and can further increase vulnerabilities with online risks also present.”
Calling on the blockchain community to protect children
Given the risks associated with crypto and blockchain in regard to minors, Guerrero mentioned that it’s up to the blockchain and crypto community to help ensure the well-being of children moving forward. “The blockchain and crypto community must use their deeper technical understanding to actively engage with the child rights community,” he remarked.
As a solution, Guerrero thinks that blockchain applications should have built-in KYC requirements. This may be easier said than done, though, as he also believes that KYC remains an open question for crypto wallets and exchanges. Although KYC requirements may be challenging, Guerrero noted that having more educational tools will benefit the well-being of minors who are getting involved with crypto and blockchain. This may be a more realistic solution for the time being, as several educational initiatives are already underway.
For example, in 2021, Gemini partnered with Learn & Earn, an app that teaches students about financial literacy while earning fiat rewards. In addition to initiatives from exchanges, some governments are taking it upon themselves to teach youth about crypto. Last year, Colombia funded a mobile app, board game and book designed to educate young people on investing in cryptocurrencies and the stock market.
Other organizations are also developing additional educational projects. Aaron Kahler, founder and CEO of ATII, told Cointelegraph that ATII is hosting regular child safety training sessions and lectures on how to keep minors safe when engaging with digital assets and blockchain applications: “We are hosting a summit on the topic in May that will include a ‘dark webathon’ and child safety day. We are also bringing in folks from law enforcement and other organizations to speak about child safety.”
What Can You Do In Decentraland’s Metaverse?
NFT Project Spotlight: CryptoBatz, Ozzy Osbourne’s Biting Bat NFTs
No precedent: IRS court settlement doesn’t clarify crypto staking taxes
There is yet to be a conclusive court ruling regarding the taxation of staked crypto rewards; however, a recent case demonstrates industry progression.
In May 2021, a Nashville couple known as the Jarretts filed a lawsuit against the United States Internal Revenue Service (IRS) over taxes they had paid on unclaimed and unsold Tezos (XTZ) staking rewards. At the beginning of February, news broke that the lawsuit filed by the Jarretts had come to an end, resulting in the IRS issuing the couple a tax refund for $3,793.
Confusion among crypto holders
Not long after this news made headlines, confusion among the crypto community piqued. One crypto media publication sent a tweet from its official account on Feb. 2, 2022, saying, “BREAKING: IRS will not tax unsold staked crypto as income.” The tweet generated over 4,000 retweets and over 18,000 likes, as Crypto Twitter rejoiced over the assumed notion that the IRS would not tax unsold staked crypto.
More confusion resulted as mainstream media outlets proceeded to publish articles implying that the IRS would not tax passive income from staked crypto. For example, a recent Forbes article published by a senior contributor stated:
“This is a huge win for crypto holders in the U.S. In light of this new information, even without this formal court ruling, some taxpayers might decide to follow a bit aggressive approach and not report staking income at the time of receipt.”
Clearing the air: A ruling was never made
Seth Wilks, head of government relations and SME at TaxBit — a platform specializing in cryptocurrency taxation — told Cointelegraph that a slew of misinformation was spread and false conclusions being made regarding the lawsuit:
“In the eyes of the IRS, nothing has changed. Their position on staking income is the same as it has been for the last several years. This case was really more about a legal procedure than anything else. There was no court ruling that another taxpayer could point to as precedent. Settling this case was the only thing in contention here.”
Wilks said that a court ruling is still to be made, as the IRS has only settled the dispute by paying the couple a refund. He added that assuming the plaintiffs don’t come up with an unexpected legal argument to keep the case moving forward, the likely outcome would be for the judge to fully dismiss the case. “From a legal standpoint, I envision the Department of Justice — which is the law firm for the IRS in these matters — will file a motion with the court to have the case dismissed, citing mootness, meaning it’s no longer applicable since a refund was issued.”
On the other hand, Wilks pointed out that the Jarretts may continue to push the case forward, noting that the couple is working with a team of savvy lawyers while also receiving support from the Proof of Stake Alliance (POSA), which is an industry advocacy group. Given this, the Jarrett’s recently released a statement indicating their goal to have the IRS clarify its position on taxing staking and block rewards “for both proof-of-stake and proof-of-work” systems.
This is important since no clear guidance currently exists for taxing unclaimed staking rewards. As of now, the IRS only asks taxpayers whether they have “received, sold, exchanged or otherwise disposed of any financial interest in any virtual currency.”
Alison Smith Mangiero, a member of the POSA board of directors and president and founder of Tocqueville Group — an asset management firm — told Cointelegraph that the Jarretts’ case may represent the first legal opinion to be written on the subject of taxation of crypto staking rewards.
“This is huge, as POSA has been working on this issue since we started almost three years ago,” she remarked. According to Mangiero, many taxpayers are in similar positions as the Jarretts. Therefore, she thinks it’s crucial for legal arguments to be made around this issue. “This is an argument backed by over 100 years of tax law, and it’s important for people to understand this is a viable position,” she said.
Mangiero added that the POSA worked with law professor Abraham Sutherland in 2019 to initially make the argument around taxation for block rewards. As a result, a detailed report was published by Sutherland in the SSRN, formerly known as Social Science Research Network. The report’s abstract notes that Sutherland “concludes that for both proof-of-work and proof-of-stake cryptocurrencies, the best approach is to tax reward tokens only when they are sold or exchanged.”
With this in mind, Mangiero remarked that the IRS does not determine what is taxable income, but rather its job is to enforce the tax code. She further noted that Sutherland is a legal advisor for the POSA, who also serves as a counsel in the Jarretts’ case.
Next steps: Clarification on staking
Even if the case does progress, Wilks said that the IRS must still issue clear guidance around the definition of staking before an official court ruling can be made. As of now, there is no specific IRS guidance on the definition of staking, resulting in added confusion. Wilks said:
“The IRS needs guidance on delegating staking rewards and staking on DeFi [decentralized finance] networks, for example. I’m guessing they are trying to sort this out now, which is why it’s also inaccurate to say that the IRS has just given up on the matter entirely.”
As such, Wilks believes crypto staking rewards and taxation will remain a crucial issue for the IRS, noting that advocacy groups like the POSA will keep pushing for clarity. Indeed, Mangiero noted that the POSA has been working on educating Congress around the issue of how staking rewards should be treated. She explained that the POSA worked with leaders from the Congressional Blockchain Caucus to help write a letter to the IRS in 2020 on issuing formal guidance detailing why staking rewards should be treated as created property. She added:
“We will continue to fire away on all fronts. In terms of defining staking, we are focused narrowly on people participating in securing PoS [proof-of-stake] blockchains and being rewarded for creating those tokens. That is what the focus is for The Jarretts’ case, and this is where we are trying to focus first since it’s one of the least complicated staking situations.”
While educational initiatives from the POSA may help with clarity on the topic, Wilks pointed out that the IRS guidance on mining could also potentially support tax implications for staking activities. He mentioned that this may be likely due to the similarities the IRS perceives between staking crypto rewards and mining.
“It is very unlikely that the IRS would make a policy change on staking without taking into consideration mining,” said Wilks. Although it’s difficult to predict what such a policy would entail, Wilks wrote in a recent TaxBit blog post, “If you follow and apply IRS Notice 2014–21, the guidance on mining income, a staking reward is taxable as ordinary income at its fair market value on the date you receive it.”
In the meantime, Wilks believes that even if the Jarretts’ court hearing doesn’t provide legal precedent, it may result in some insight into the IRS’ current position on the issue. Mangiero added that it’s notable that the U.S. Department of Justice said it would issue a refund after a year and a half into the case:
“This is a good sign and an early signal that these legal arguments are now reasonable positions. However, this remains a complicated issue, and we need to be careful against spreading misinformation.”