The appeal to make fast, easy money without having to put in a lot of effort is enticing to most people.
How many people would love to win the lottery?
The problem comes not from people wanting to make easy money. The problem is when the method of making this money does not care about ethics and who gets hurt in the process. The end justifies the means, apparently.
In any group of people there are going to be others who push the envelope. This by itself is not a bad thing. If they are adding extra value and competing by who is adding the most amount of value to the customer, then this can actually be a good thing.
Now if they generating money via illegal activities; like fraud, laundering money, selling drugs, human trafficking, stealing from other people, etc, then this is a problem, and really destuctive for society.
Chargebacks
In any large group of people there are going to be some bad actors.
If we look at how the current financial system deals with these people at the least extreme of cases we start with chargebacks.
A chargeback occurs when the cardholder or their bank/financial institution raises a dispute in connection with a card transaction.
This is a way for cardholders to retrieve money lost to fraudsters, identity thieves, and other unauthorised purchasers. It can also be used as a threat to try and incentivize merchants to stick to fair, above-board practices.
As things progress to a higher stake, the banks can then start freezing accounts, this will stop the person from even using the account and all assets put on hold till things are worked out or to be handed over to law enforcement.
This can go to the extreme of what is referred to as being unbanked, where the person has no access to any financial services.
Weaponizing the financial system
These methods sound good in dealing with the bad actors, as we do not want the dangerous/illegal method used to generate money, we want to stop these people.
In general we want to hit them where it hurts the most. In their wallet.
This will do the most damage so it makes sense.
The problem is the road to hell is paved with good intentions, there are unforeseen complications from adding this power.
Let’s look at chargebacks, a way for consumers to have some level of control.
Some of the non valid reasons people are using charge backs now.
Contacting the bank seems easier:
You have a relationship with the bank and you might feel it is quicker and easier to talk to the bank than to try to work out who to talk to and you do not even need to explain why.
Buyer’s remorse sets in:
You might have bought something, then find while it does what it promises, it does not do what you thought it would do, or you might not find you had the need you thought you did.
So regret buying it and file a chargeback on the product or service.
A family member used your card:
Someone in your household consents to the transaction. They use your card, so it was a valid transaction. But since you did not know that, you call the bank and they issue a chargeback, even though the business/individual did nothing wrong they are hit with the chargeback.
You do not remember making the purchase:
Sometimes you look at a statement and this listing of what is there is not clear to what the activity was that you purchased, and since you do not remember what it is you feel it could be fraud and ring the bank up and they issue a chargeback.
The problem is that the person issuing the product is now hit with high fees, it can also put their whole business in jeopardy as the merchant provider could go, you have been hit with too many chargebacks, it is too risky to deal with you, let just cancel you instead.
So the merchant has to be very careful with this.
Now if everyone acted in good faith, that would not be an issue, but even at a small level you still have bad actors who may use this as leverage to force the business to do things they normally would not do to not be issued with a chargeback.
Maybe the person feels slighted for some real or imagined issue so they cause a charge back anyway.
When a cardholder files an illegitimate or unwarranted chargeback and keeps the product, they are stealing it, it is the equivalent of cyber-shoplifting.
This also increases costs as you also have to have people meditating any questioned transaction.
Going further down the rabbit hole, you start to get to the way when people who think differently or do not follow the party line can now have their access to money halted.
An example of this is when the Canada truckers protested over the vaccine mandate, the government was so annoyed at them they started freezing assets.
Another example is when Russia invaded Ukraine, there were sanctions against the country, so the civilians whose worst crime was being born in the wrong country had the financial system used as a weapon against them.
What this means for crypto
The government and, by extension, regulators are going to do everything to stop bad actors.
They are also going to want to have the ability to protect consumers, so ways of doing this is by reversing transactions, blocking people from being able to send or recieve money and freezing assets of people in question.
Something like privacy can not work in this environment otherwise they do not know who is doing what.
A permissionless system is also not going to work because there will be no way to roll back transactions or freeze accounts.
While I can see why the government/regulators would want a system that gives them control compared to a permissionless system, they could easily claim it was done in stopping bad actors.
There are always going to be bad actors. Those people should not be supported and need to be stopped.
Having the ability to use the money system as a weapon to stop those people might sound like a good idea, but I have also seen when government departments have made mistakes too, this level of power and control could have a lot of unforeseen negative consequences, without much recourse.
I feel like crypto should work similar to cash, not trackable, free to be spent without the restrictions, and can be sent or received cross border without checks.Allowing people to be able to manage their own financial needs and not have the system be able to be used as a weapon against them.
Bad actors need to be stopped, but I do not think corrupting the money system to give that option is good either. Especially if crypto becomes the main way to send and receive money.
Having these guards in place could do damage. At the end of the day, you are giving control to a person. A person is going to have bias and can be influenced, which could cause damage to people by accident.
It is better to remove this avenue of attack and focus on other methods to stop bad actors.