No one can deny the fact that cryptocurrencies have revolutionized the modern financial industry and the lives of many people in general. At the same time, with the huge social impact that they had, cryptos could not but generate a number of new ethical challenges for society. To one degree or another, every crypto holder faces these ethical dilemmas and sometimes needs to resort to guidelines of crypto ethics to respond to them.

Crypto ethics 101: Using blockchain technology responsibly

To identify ways to address the main ethical issues associated with cryptocurrencies, it is first worth outlining these issues. Although, depending on the approach, their list can include countless items, we will consider only the most resonant and impactful aspects that are most frequently put forward by crypto skeptics as the arguments against the blockchain technology.

With this in mind, we can distinguish the following three ethically ambiguous areas of cryptocurrency application:

Crypto and taxation

Background: One of defining features of blockchain technology is the privacy of transactions. Of course, it is difficult to call crypto operations entirely anonymous. They are much more open in general than, say, bank transfers, as all blockchain transactions are recorded on a public digital ledger. However, crypto users enjoy something known as pseudonymity, provided by them using wallet addresses (public keys) instead of real usernames.

Ethical problem: This way, despite crypto transactions’ transparency and openness, the use of public keys instead of personal data of crypto holders allows the latter, if necessary, to obscure their financial activities, which may take a twisted turn. For example, for entrepreneurs, this model provides a tempting opportunity to accept crypto payments for their goods and services without reporting their earnings to tax authorities. This can create a financial blind spot where income remains hidden from traditional taxation systems, providing fertile ground for tax evasion.

However, it is essential to recognize that the potential for avoiding tax responsibilities by using crypto in this manner does not absolve individuals from their legal obligations. Tax evasion is a serious offense in many jurisdictions and can result in severe consequences, including fines, legal actions, and damage to one's reputation.

How to stay a responsible crypto user: Financial responsibility includes a commitment to both the ethical and legal dimensions of financial transactions, with adhering to taxation regulations in their respective jurisdictions being among the most important ones. If you receive any part of your income in crypto and the laws of your country require you to declare such income and pay taxes on it, follow these regulations and do not try to avoid them by using the loopholes that blockchain technology can offer.

Crypto and criminal activities

Background: Cryptocurrencies’ pseudonymous nature and focus on decentralization led to them gaining notoriety as a means of facilitating criminal activities. Thus, it is no secret that, while blockchain technology enhances security and transparency, some of its features may also make it attractive to illicit actors. Understanding the extent of this problem is crucial to address ethical challenges associated with cryptocurrency.

Ethical problem: Undoubtedly, it would be neither right nor fair to brand cryptocurrencies as inherently criminal simply because they are sometimes used for illegal purposes. Blockchain technology is a tool that is neutral in its nature. When someone uses a tool to commit crimes, the perpetrator should be blamed for such crimes, not the tool they use. Therefore, any arguments against cryptocurrencies based on cases of their criminal use are illogical and ridiculous.

However, it is impossible to deny the fact that blockchain technology can indeed be used for criminal purposes. For instance, criminals can exploit cryptocurrencies for money laundering by converting illicit funds into digital assets, making it challenging for authorities to trace the origins of the money. Besides, cryptos may sometimes be used as a means of payment for illegal goods and services in the darknet markets. Again, such patterns of crypto usage do not suggest that digital assets are malicious as a phenomenon; however, it is necessary to recognize their existence to develop the best guidelines for ethical trading and crypto utilization.

How to stay a responsible crypto user: Undoubtedly, in the context of the criminal use of cryptocurrencies, the main recommendation for ethical crypto community is obvious: never engage in such practices and report illegal activities that you witness. In addition, it is important to comply with your local laws related to cryptocurrencies and to fully cooperate with law enforcement authorities if you become involved in illegal practices in any way, knowingly or accidentally.

Also, in this regard, crypto education becomes another highly potent tool. Crypto users need to educate themselves about the potential risks and controversial issues associated with the legitimate use of cryptocurrencies to avoid even accidental association with criminal practices. In the matter under discussion, knowledge is your primary tool for sticking to ethical investment practices and remaining an ethical crypto user.

Crypto and environmental impact

Background: The rise of cryptocurrencies has captivated the financial world, driven by their promise of decentralization and improved security practices. However, after the initial excitement about the digital revolution cryptocurrencies brought, a significant ethical concern emerged in the form of the environmental impact of cryptocurrency operations, caused by crypto mining.

Ethical problem: Cryptocurrency mining, particularly in the case of blockchains running on the Proof-of-Work protocol, relies on powerful computer hardware processing complex mathematical puzzles. Miners compete to solve these puzzles, and the first one to do so is rewarded with new cryptocurrency coins and the opportunity to add a new block to the blockchain. But here’s the issue: this process demands an enormous amount of computational power, which, in turn, consumes sky-high volumes of electricity.

Meanwhile, today, most of the world’s electricity still comes from burning fossil fuels. Considering this fact, environmentalists didn’t hesitate to add 2+2 and put forward a (rather just) claim, according to which more cryptos mined via the Proof-of-Work procedure means more fossil fuels burnt, which, in turn, leads to more greenhouse gases emitted. The emission of these gases is often cited as one of the core factors impacting climate change, which is one of the biggest threats to the environment in the modern world.

How to stay a responsible crypto user: Unlike the previous two problems, in the case of the environmental impact of crypto, it is somewhat more difficult to mitigate it from the point of view of the average user. It is only together that users can put pressure on the main crypto actors and encourage them to adopt more environmentally responsible practices, including sustainable mining and transition from Proof-of-Work to a much more energy-efficient Proof-of-Stake protocol.

Thus, advocating for sustainability and raising awareness about the environmental impact of some blockchains are the key practices which crypto ethics would suggest you do in this regard. In addition, for crypto users who are sincerely interested in mitigating negative environmental impact, it would also be advisable to pay attention to cryptocurrencies based on Proof-of-Stake protocols and allocate a proportionally larger share of their transactions to such blockchains.

Wrapping up

Blockchain technology is a tool created to improve people's lives in some respects. Like all tools, it can be used both ethically and vice versa. It is important to remember that the facts of unethical and even illegal use of cryptocurrencies are not arguments against such currencies, but arguments against people who commit such irresponsible actions.

That being said, there are numerous ethical issues that you should be aware of in order to avoid them in your crypto journey. First, some people utilize blockchain as a tax avoidance tool. Some other digital assets holders violate the norms of responsible use by exploiting pressing privacy concerns to commit criminal activities, from darknet shopping to money laundering. Finally, it is important to remember that cryptocurrencies that function based on the Proof-of-Work protocol create ethical ambiguity in terms of their environmental impact due to excessive electricity consumption.

Undoubtedly, when it comes to all the mentioned issues, you should first and foremost avoid any intentional illegal or unethical actions related to cryptocurrencies. At the same time, to be an ethical crypto user, you should also make an effort to prevent accidental misdeeds in this area. Familiarize yourself with your local regulatory compliance principles regarding crypto investment and holding and do everything you can to comply with them. Even though crypto is a relatively young and innovative financial field, this does not mean that it operates outside the law. Also, do not hesitate to report crypto-related crimes you witness and advocate for improvements to the blockchains you use in terms of social, environmental, and financial responsibility.

Cryptocurrencies can bring enormous benefits to humanity. However, if they are misused, their positive financial and social impact can be compromised, harming both the blockchain's reputation and the technological progress of humanity as a whole. The most important thing you can do is to be a responsible crypto user and avoid violating the laws governing this field. Follow these principles, and you will be able to explore and trade crypto without any pangs of conscience!