Authoritarian 'freedom money'

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May 12, 2022 View in browser   By Ben Schreckinger Presented by the National Association of Broadcasters and the News Media Alliance With help from Derek Robertson El Salvador President Nayib Bukele visiting Beijing. | Noel Celis/Getty Images Can Bitcoin, whose boosters like to call it "freedom money," be put to authoritarian ends? That's one of the questions I pondered while reporting from El Salvador, where President Nayib Bukele's embrace of the cryptocurrency has coincided with a crackdown on civil liberties and consolidation of power that critics have likened to a coup. As Claudia Ortiz, an opposition lawmaker and potential challenger to Bukele in the country's 2024 presidential election, put it to me: "The Bitcoin philosophy is about freedom, but in El Salvador the Bitcoin experiment is part of an authoritarian project, and that's incoherent." Bitcoin's early backers viewed it as a libertarian technology that would free money from government control. But in El Salvador, it could end up giving the government more control. That's because Bukele has rolled out a government-backed Bitcoin wallet app, called "Chivo," (slang for "cool" — the literal translation is a goat). The app is custodial, meaning that Chivo controls the Bitcoin and updates users' balances on their behalf — in just the same way that a traditional, dollar-denominated bank would. It's the sort of thing hardcore Bitcoiners disapprove of, because they want users to take direct control of their Bitcoin, despite the risks that entails. It means that if Chivo takes off, El Salvador's government would have much greater power to control and surveil movements of money than it does with the current mix of old-fashioned cash, banks and international credit card companies. But as I learned in El Salvador, that's a big if. Salvadoreans would have to use Chivo for this to matter. So far, most aren't. One of the big reasons for that is that the Chivo wallet doesn't work very well. While Bukele's most prominent critics, like Ortiz and the economist Tatiana Marroquín, pointed to Chivo's implications for state power, most Salvadorans I encountered were more likely to cite problems they had getting the app to work as a reason they stopped using it. It's worth noting, too, that in El Salvador, there is no requirement to use Bitcoin at all — most people choose to keep to the U.S. dollar, which has been El Salvador's official currency for over two decades — and those who do use Bitcoin are free to use wallets other than Chivo. But like so much else about the El Salvador experiment, the questions it raises about potential authoritarian uses of digital currency have implications around the world. Already, China's digital yuan has raised similar concerns. Efforts by Western governments to pursue central bank digital currencies of their own have also raised concerns about privacy and the potential for central banks to wield direct control over citizens' personal finances. Back in El Salvador, the problems with Chivo are just one of the factors hobbling the country's Bitcoin experiment. You can read more about the other setbacks, and a few nascent successes, in my just-published report.   A message from the National Association of Broadcasters and the News Media Alliance: Big Tech threatens the future of local news. We must ensure Americans continue to benefit from the important information that only local broadcast, radio and newspaper outlets can provide. Now is the time to act. Ask your member of Congress to support fair compensation for news outlets by supporting the Journalism Competition and Preservation Act (JCPA) now. #SupportLocalNews Learn more.   crypto and congress Carrick Flynn poses for a portrait on Dec. 29, 2021. | Ashley Dimeo Buchan In POLITICO Magazine today, contributing editor Ian Ward profiles Carrick Flynn, a candidate for Congress in Oregon's 6th District in part to further his philosophy of effective altruism. Flynn's largest donor is Sam Bankman-Fried, the founder and CEO of crypto exchange FTX. Here's an excerpt about Flynn and Bankman-Fried's ambiguous and somewhat frosty relationship: One topic you won't find Flynn spending much time talking about on the campaign trail is cryptocurrency regulation, the issue that has turned Bankman-Fried into a object of curiosity in Washington. Nevertheless, Bankman-Fried's support for Flynn's campaign has fueled suspicions among progressives that Flynn is merely a puppet to advance Bankman-Fried's preferences on cryptocurrency rules. A recent article in the influential progressive magazine the American Prospect noted that Bankman-Fried's donations to Flynn come as "'[c]rypto regulation is at the precipice of being debated in Congress" and observed that while his donations "ostensibly … support candidates who favor 'pandemic preparedness,'" they also "suspiciously [line] up with the establishment-progressive divide." Flynn — who identifies as "not a crypto guy" — says he understands voters' suspicion but insists he doesn't harbor any pre-determined position on potential crypto legislation. "I have a framework for [evaluating] all financial regulation, which is … that it's not gonna harm the working class or the middle class [or help] shysters taking advantage of people," says Flynn. "I think it makes sense to have like a base cynicism, but I think at some point, if you're finding that Protect Our Future sponsors people who do pandemic prevention, and, like, have no crypto background at all — there's a point at which you say, 'Oh, maybe this isn't the thing I initially thought.'" There's an element of novelty to crypto "new money" entering the world of politics — but nothing new at all about the fundamental dynamic at play here, of a very rich person using his wealth and clout to promote his ideology in public life. — Derek Robertson Afternoon Snack A Bowdoin University undergraduate recently colluded with a professor to get his classmates to assess an AI-generated paper as if it were written by a human. Although it earned a few chuckles for its awkwardness, the class ultimately gave it mostly Bs and Cs — a result that says more about collegiality and lenience among students than anything about large learning models. Cuevas-Landeros is majoring in philosophy and "digital and computational studies". "The program directly ties into some of the things we're talking about, like functionalism," Cuevas-Landeros said. "Are we just our behaviors? Are we just mental states that can be mapped to a certain state of being?" His experiment is the latest example of what's become almost a journalistic sub-genre unto itself: AI-assisted sleight of hand. There's the 2020 Guardian article bylined to OpenAI's GPT-3 (with an editor's heavy assist); Kevin Roose's AI-assisted book review in the New York Times; a demonstration of the potential for AI to generate "fake news"; and an AI-authored press release (for, of course, an automation-friendly marketing company). It's not exactly difficult to imagine why the media might be obsessed with a machine that can generate language. But to play a guessing game over whether a person or a machine authored any particular block of text does more to obscure than to illuminate the more important debate about the trajectory of AI. Are these steps towards machines that can truly act with human-like intelligence — with all the dangers that entails — or are large language models little more than a "parlor trick," as Berkeley professor and AI expert Ben Recht said in a conversation we had last week? Steven Johnson wrote last month in a lengthy feature about OpenAI for the Times that, "the very premise that we are now having a serious debate over the best way to instill moral and civic values in our software should make it clear that we have crossed an important threshold." Maybe so, but much like the Cuevas-Landeros' bogus essay, that might say more about us than it does about the machines. — Derek Robertson   A message from the National Association of Broadcasters and the News Media Alliance:   The Future In 5 Links Leaked documents show that the South Korean government is bullish on crypto, to say the least. The Senate confirmed President Biden's FTC nominee, opening the door to tech regulation with teeth. California wants to use AI to fight wildfires, but processing the mounds of data that will be needed will be a serious challenge. A Swiss city is hoping to make itself a stablecoin hub. Bitcoin's rise and fall is increasingly matching the NASDAQ, an unwelcome development for crypto utopians. Stay in touch with the whole team: Ben Schreckinger (bschreckinger@politico.com); Derek Robertson (drobertson@politico.com); Konstantin Kakaes (kkakaes@politico.com);  and Heidi Vogt (hvogt@politico.com). Ben Schreckinger covers tech, finance and politics for POLITICO; he is an investor in cryptocurrency. If you've had this newsletter forwarded to you, you can sign up here. And read our mission statement here.   A message from the National Association of Broadcasters and the News Media Alliance: The dominant Big Tech platforms, such as Google and Facebook, are gatekeepers of online content, using local news outlets' stories and taking the majority of U.S. digital advertising revenue. This leaves local news with little to reinvest in high-quality journalism. Americans rely on local news outlets to know what is happening in their communities. The bipartisan Journalism Competition and Preservation Act (JCPA) would allow local news outlets – including radio and television stations and newspapers – to come together to negotiate with Big Tech for compensation for access to their original content. Ask your member of Congress to support the JCPA now. Learn more.     Follow us on Twitter Ben Schreckinger @SchreckReports Derek Robertson @afternoondelete Konstantin Kakaes @kkakaes Heidi Vogt @HeidiVogt   Follow us

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