We have recently seen real-world scenarios where stablecoins like Tether’s USDT and Circle’s USD Coin (USDC) have become important tools.

In Turkey, for example, high inflation has led citizens to embrace these digital assets as a hedge against the volatile national currency.

Stablecoins promise freedom from the constraints of traditional financial systems, but the extent to which they actually deliver on this promise depends on how you define freedom.

When looking at stablecoins in the context of various definitions of freedom that appear in the political science literature, this new form of currency leaves a lot to be desired.

To understand why stablecoins fall short when it comes to personal freedom, and why Bitcoin (BTC) is a success, take a look at some political philosophers and how they define freedom. It is useful to know.

three definitions of freedom

Let’s start with Russian-British political theorist Isaiah Berlin and his most famous essay, “Two Concepts of Freedom.” In it, he argued that freedom can be understood primarily in two ways: negative freedom and positive freedom. Negative freedom, often referred to as “liberal freedom,” refers to the absence of interference or barriers. That is, to be left alone.

In contrast, positive freedom focuses on actively exercising freedom to realize goals and possibilities.

There is also a third option, a “republican” or “neo-Roman” conception of freedom, which raises questions about governance in light of both interpretations.

Irish philosopher Phillip Pettit was a pioneer in this field, emphasizing that republican freedom is the absence of domination, and later British intellectual and historian Quentin Skinner. emphasized freedom from dependence.

According to both, the mere presence of arbitrary power that can interfere in one’s life does not make one free.

Before we get back to talking about crypto assets (virtual currencies), let’s look at freedom in another way. I used a door as an analogy.

Negative freedom is having many doors to choose from, and positive freedom is walking through the door of your choice. Republican freedom brings another layer, like having many doors without gatekeepers.

In this sense, you are free as long as no one interferes with you. This is similar to the liberal concept of freedom mentioned above, but from a republican perspective, freedom is already restricted just because it can be interfered with. In other words, in order to control this gatekeeping, positive freedom is first needed only to secure negative freedom.

Freedom that stablecoins lack

From this perspective, the problems with stablecoins become clear. Stablecoins could be said to offer negative freedom in that there are few barriers to using these financial systems, as long as the system operates smoothly. But it fails in terms of republican freedom, or freedom without domination.

The problem is that stablecoins are created and controlled by centralized organizations. The stability and accessibility of stablecoins is tied to the decisions of these companies. It’s free until someone interferes. But crucially, that freedom is at the mercy of the issuing company.

Let’s take a look at the recent situation in my home country, Turkey. Amid the crisis in the country’s banking system and inflation, many Turkish citizens are using stablecoins, especially USDT on Tron, to protect their wealth.

At first glance, it seems attractive. Instead of relying on governments to supervise banks, they are trusting foreign companies. But from one perspective, this just replaces one bad boss with another.

Whether power is held by governments or corporations, the problem of arbitrary power remains. That is the lesson of republican liberty. They may be subject to external control without being able to significantly influence the processes governing economic activity.

But Bitcoin offers a truly decentralized option, bringing us closer to freedom as non-domination. The decentralized nature of Bitcoin prevents the domination associated with stablecoins and the centralized structures of traditional finance.

Each participant can influence the network’s decisions, reducing the risk of arbitrary power and fostering a more republican view of freedom.

In conclusion, stablecoins may look like a lifeline in a volatile financial climate. However, inherent dependence on a centralized publisher undermines freedom as non-domination.

It is not enough to replace one master with another, be it government or business. True financial independence comes not by replacing chains, but by eliminating or controlling them.

｜Translation and editing: Akiko Yamaguchi, Takayuki Masuda
｜Image: Stefan Kostoski/Unsplash (processed by CoinDesk)
｜Original text: In Search of Financial Freedom: The Answer Lies With Bitcoin, Not Stablecoins