The Pandora Papers Show Why People Love Crypto: You Can’t Trust the Powerful

The same offshore fig leafs helping elites to dodge taxes have underpinned decades of rampant state-backed abuse.

AccessTimeIconOct 5, 2021 at 7:29 p.m. UTC
Updated May 11, 2023 at 5:48 p.m. UTC

There are many nuanced, detailed arguments for the inevitability of cryptocurrency and blockchain’s growth and adoption – advantages of efficiency, trust, privacy and autonomy that are already proving out at a global scale. But interest in cryptocurrency is driven perhaps most of all by something more elemental and emotional, a deep intuition that has been rising around the world for decades: that the people in charge cannot, and should not, be trusted.

That sense of rising distrust was validated yet again with the Oct. 3 release of the so-called Pandora Papers, a trove of almost 12 million leaked documents from law firms and other organizations around the world. The documents unmask the previously unknown owners of 29,000 offshore companies hiding billions of dollars in assets from taxation or oversight. The owners include political leaders, celebrities and underworld figures from more than 200 nations, with the bulk from Russia, the U.K., Argentina and China, according to the International Consortium of Investigative Journalists, which coordinated initial reporting on the documents.

The leak shows that former British Prime Minister Tony Blair, singer Shakira and many other familiar faces engaged in, at best, aggressive tax avoidance that was accomplished by hiding assets in extremely complex corporate legal entities. Though in some cases hidden funds seem linked to outright corruption, much of this activity is nominally legal – but the very existence of such structures almost guarantees they’re being used for deeply harmful ends well beyond dodging taxes.

For those in the crypto world, it is tempting to frame these revelations in terms of simple “whataboutism.” And hooboy, what about this: By one estimate, as much as $32 trillion in assets worldwide may be in offshore tax havens. That’s roughly 15 times the total value of all cryptocurrency in existence, and much of it amounts to theft by world leaders from their own citizens. The tax revenues missing thanks to those hidden funds mean immense amounts of missing public infrastructure and services worldwide, at the particular expense of the poorest and most vulnerable people.

That certainly drives home the absurdity of global regulators’ relentless focus on cryptocurrency systems as vectors for money laundering and tax evasion. Regulators, it seems, find it easier to punch downward at an emerging technology than to challenge the legalized corruption of the legacy banking system, or the hegemony of their bosses.

Focusing on that “what about,” though, is playing the short game. It can be tempting to argue that crypto makes the same tricks available to everyday people, which may be appealing to those of a libertarian bent, but strikes me as nothing but a race to the bottom. More importantly, it’s a false equivalency: What world leaders have accomplished through offshore entities and shady banks simply can’t be replicated by average people using crypto.

On a superficial level, that’s because crypto cannot match the secrecy assured by offshore entities. While much early coverage of bitcoin focused on its “anonymity,” it has become clear that it’s relatively easy to triangulate ownership of bitcoin and many other tokens with a little elbow grease. Even so-called “privacy coins” are imperfect. But if you can afford a private jet to the Caribbean, it appears, you can afford truly anonymous banking.

More importantly, the cross-border asset concealment detailed in the Pandora Papers is part of a much larger and more complex system of shadow influence that relies on institutional political power and generational wealth, not just the ability to hide large amounts of money from monitoring. The same channels used for tax avoidance and personal secrecy are also powerful tools for even more nefarious activities: state-sponsored drug trafficking, murder and anti-democratic violence.

To pick just one well-documented example, consider the Bank of Credit and Commerce International, or BCCI. Nominally a Pakistani bank, BCCI was revealed in the early 1990s to have been a likely front for the U.S. Central Intelligence Agency (CIA). The “bank” was a major funnel for international drug trafficking proceeds, and the CIA allegedly protected those laundering activities from scrutiny by international law enforcement. That protection was extended because the agency allegedly needed a channel to move its own off-book drug-running proceeds to anti-communist South American guerillas. Those guerillas, particularly the Contras in Nicaragua, turned out in substance to be terrorist death squads. The CIA was even alleged, in the pages of the Washington Post, to be running a network of assassins out of BCCI’s headquarters.

Though the scandal triggered some nominal reforms, this kind of international meddling and manipulation would seem to still be quite feasible under the current global financial system. It remains to be seen precisely what sort of activities are revealed in the Pandora Papers: They have been combed by dozens of journalists for more than two years, and reporting on the documents should be trickling out in coming days and weeks. We already know that they further implicate perhaps the most ambitious government kleptocrat and state-backed thug in the world, Vladimir Putin.

Even short of outright criminality, the offshore holdings by world leaders revealed in the Pandora Papers look an awful lot like hedges against the decline of their own countries – and an abdication of responsibility for fighting that decline. The most egregious example of this so far may be from the U.K., where a major supporter of the Conservative Party government in power has apparently been exposed for involvement with a massive $220 million bribe to the leader of Uzbekistan.

This is ironic, of course, because the Tories have been a major force behind Brexit, the U.K.’s separation from the European Union. Among its many impacts, Brexit is threatening the U.K.’s mainstream financial sector by tightening capital controls and strangling trade flows crucial to businesses large and small. Many vocal Brexit supporters had already been discovered to be hiding money offshore via the 2017 Paradise Papers leak. In effect, their attitude seems to have been “Little Britain for thee, but not for me.”

The takeaway is simply this: Global leaders too often consider themselves completely separate from the people they rule. Their aggressive thievery conveys the same attitude towards you or me that alleged sex trafficker and globetrotting heiress Ghislaine Maxwell reportedly had towards her victims: “They’re nothing, these girls. They are trash.” (Maxwell was also closely linked to the CIA through her father, “superspy” Robert Maxwell.)

The global banking system, which grants secrecy to only the wealthiest and most powerful while freely censoring the activities of everyday citizens, can only reinforce that apparent sense of superiority and separation. It’s unclear whether cryptocurrency provides a substantive answer to this rampant elite corruption. But the Pandora Papers at least explain much of the emotional drive behind crypto adoption: the simple desire to quit a system that is rotten to its absolute core.


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David Z. Morris

David Z. Morris was CoinDesk's Chief Insights Columnist. He holds Bitcoin, Ethereum, and small amounts of other crypto assets.