We’ll probably never know exactly why OnlyFans reversed its short-lived decision to ban porn, but we can always speculate that cryptocurrency was part of it. It shows how the technology doesn’t need mass adoption to help forge more financial and personal freedom. The mere optionality it offers can mitigate financial intermediaries’ ability to exercise arbitrary, extrajudicial power on behalf of governments. It’s the exercise of that power that made OnlyFans’ initial move so disturbing. That’s the topic of this week’s column.
And in this week’s episode of the “Money Reimagined” podcast, Sheila Warren and I kick off an ad hoc series of interviews with crypto OGs. We’ll get key, long-time players in this space to tell their origin stories, share what they’ve learned from their journeys and opine on where it’s all going.
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For the premiere, we interviewed Austin Hill, who is perhaps best known to crypto people as the first CEO of Blockstream. But he has a far bigger claim to OG status from his pioneering work in the pre-Bitcoin 1990s as an entrepreneur developing businesses built on privacy-preserving cryptography. Hill is an original “cypherpunk” and his take on the world, where it’s headed, and what we need to do to fix it is fascinating.
Have a listen after reading the newsletter.
Don’t Let Bankers Censor Porn. It Hurts Democracy
It might seem a stretch to invoke a philosopher of the Enlightenment for a cryptocurrency column about an online subscription service being pressured to remove porn from its site.
But Baron de Montesquieu’s core argument for the “separation of powers” is made for situations like this.
You see, the real bogeyman in this past week’s OnlyFans porn saga – in which the platform initially said it would evict more hundreds of thousands of creators from its site and then abruptly reversed course to declare it would keep them – is not the popular site’s corporate owner, or even the banks that reportedly pressured it to remove the content. It’s the state.
Until the decision reversal, this was shaping up as an especially ugly case of government overreach. In allowing – actually, encouraging – financial gatekeepers to act as self-appointed sheriffs for a field of commerce that’s in all other respects entirely legal, the U.S. government was exercising something that greatly bothered Monteseqieu in 18th century France: arbitrary power.
Checks and balances
Think back to those Poli-Sci 101 classes on the separation of powers. The executive branch, with its police, prosecutors and regulators, executes the law. But it doesn’t create it. That’s the job of the legislature, which is in turn denied the authority and the weapons needed to enforce the rules it makes.
What you’re supposed to end up with is the Rule of Law, which makes everything nice and predictable. Only activities the legislature has deemed illegal are restricted by the state. It has no authority to act against anything that lawmakers haven’t outlawed.
However, in our modern financial system, which gives banks the power to issue credit, manage payments and, ultimately, create money, there’s a flaw in this design.
These privately owned institutions are uniquely positioned to control people’s behavior. Until the arrival of cryptocurrency, it has until now been virtually impossible to engage in non-cash commerce without the blessing of a bank. But banks themselves are beholden to government influence, mostly because they are so tightly bound by compliance rules set by statutes such as the Bank Secrecy Act, the Dodd-Frank Act and Sarbanes-Oxley. This essentially makes them agents of the State’s interest.
This is why the OnlyFans flip-flop offers a glimmer of hope. While the reversal was no doubt motivated by fears of losing revenue – most of the more than $1 billion projected for this year is expected to come from porn – it’s important OnlyFans did so after it “secured assurances necessary to support our diverse creator community.” This suggests the bankers had secured assurances from authorities they were not going to run into compliance problems.
We’ll probably never know what discussions took place for all the parties to shift their positions, but it’s worth speculating whether the recent emergence of a peer-to-peer payment alternative forced their hand. Cryptocurrency may not have directly come to the sex workers’ rescue, but the very idea they could use it in lieu of credit cards, quite possibly contributed to what, in my view, was a victory for free speech and the Rule of Law.
Banks as guns for hire
As we’ve discussed frequently in Money Reimagined, U.S. international economic hegemony arises directly from this relationship. The cooperation of banks in monitoring and reporting monetary transactions is integral to how the U.S. enforces sanctions against blacklisted members of rogue regimes. Banks aren’t just service providers to businesses and individuals; they are also off-the-books mercenaries, working on behalf of governments.
This tight relationship has led, far too often, to regulation by stealth. And it speaks to why one of cryptocurrency’s undeniably valuable use cases lies in it allowing people to exchange money peer-to-peer without gatekeepers and the risk of arbitrary, extrajudicial enforcement.
To repeat, pornography is legal. In fact, it’s constitutionally protected speech, as per a famous U.S. Supreme Court case won by Hustler founder Larry Flynt. Similarly, cannabis businesses are now legal or decriminalized in most U.S. states. And guns are legally sold pretty much everywhere across the U.S. Yet, all these industries frequently find themselves cut off from payments solutions, thanks to capricious bankers.
The banks and their regulators would no doubt argue this had nothing to do with government orders, that this was a business decision made by private entities in the public interest to protect their reputation and brand.
Really? Think of Wall Street. Think of the excesses of the mortgage bubble and subsequent financial crisis of 2008. Think of every financial scandal you can name. Think of HSBC’s $1.9 billion settlement with federal authorities for facilitating money laundering with Mexican drug cartels. Banks will make money however they can; there’s no social conscience dictating decisions like this. It’s all CYA.
It’s not tinfoil hat-think to believe banks were pressured to do this by authorities. There’s plenty of precedent. Read up about “Operation Choke Point,” the 2013 program led by the U.S. Department of Justice’s investigations into banks doing business with firearm dealers, payday lenders and companies in other industries suspected of being prone to fraud and money laundering.
As with the content produced by OnlyFans creators, the business activities of companies targeted under Operation Choke Point were legal. Officials merely suspected that participants in these industries were somewhat more likely to be doing something illegal, so they instructed banks to cut them off. Such businesses weren’t prosecuted – there was no legal grounds for doing so – but they were denied the lifeline of payments.
If it ain’t illegal, don’t touch it.
For the record, there are legitimate concerns that parts of the porn industry enable exploitation and abuse. Investigations by Nicholas Kristof of The New York Times found many popular porn sites were doing a poor job of policing content featuring underage performers.
Still, the answer to that is surely to devise better methods for catching abusers, not to invalidate a business model that sex workers say has, sometimes for the first time, allowed them to safely earn a direct, disintermediated income without risking physical contact with potentially violent clients.
My personal view on porn is that if adults give consent for their images to be used in this manner, then they deserve free speech protections. On recreational drugs, I firmly believe that both individual liberty and broad social interests are best served by legalizing them. By contrast, I support gun control: For me, individual rights to self-defense and autonomy are trumped by a broader social interest in containing the harm caused by deliberate and accidental firearm deaths and injuries.
Certain libertarian readers might disagree with that last position of mine. But here’s the thing: If we can’t successfully agitate to convert our beliefs into law, what you or I think on this stuff is irrelevant. If the majority believes we should banish porn or outlaw guns, then to get what they want they must convince their democratically elected representatives in Congress to vote for that. If such laws aren’t enacted, then the executive branch has no business seeking backdoor ways to curtail these industries.
Not to put too fine a point on it, but this is the road to tyranny. I’m quite certain Montesquieu would agree with me.
The good news is we don’t have to follow the logic of the Enlightenment and storm the Bastille to depose the French monarchy and install a republic. We now have a far less violent means of subverting the state’s actions: cryptocurrency.
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