Is it ethical for journalists to own cryptocurrency?

The usage of cryptocurrencies — and blockchain, its underpinning technology — has reached such critical mass that media coverage is at a point of no return. From China’s impending digital currency to Facebook’s Libra project — both of which could reach billions of people worldwide — the disruption of digital assets is a global story with the potential to impact everyday users like you and me.

Yet the concept is so new that journalistic ethics around cryptocurrency ownership — in particular, for journalists covering the beat — are still unclear. Several media outlets err on the side of caution, banning writers from owning anything cryptocurrency-related. The problem is these tokens have nuanced uses. And if futurists are right, they will play an increasingly larger role in our lives. Blanket bans on cryptocurrency ownership will not last long as the understanding of digital tokens broadens and use becomes unavoidable.

Crash course: Blockchain, at its core, is a distributed ledger technology (like a virtual accounting book) that allows information to be recorded on blocks (like ledger lines), which are backed up on every node (or member library) of the network. This makes the information — anything from a transaction record to a share or a will — easy to verify and difficult to manipulate. The technology is popularly used to create digital money, but it can extend to aiding international logistics, medical records or even journalism.

For journalists, the ethics question is complicated by the technology’s diverse applications and how we interact with them. “Cryptocurrency” is a loosely used overarching term, but there exist several types of cryptoassets or tokens, each bearing different qualities.

First, payment tokens such as Bitcoin, like fiat currencies, are instruments of exchange, stores of value, and units of account. They are issued independent of a central bank, and are gaining popularity because they are easily transferred between two parties without an intermediary. Platform tokens exist to support the development of a protocol, like Ethereum, on which applications can be built. These coins can be traded, held and spent in a similar way.

Governments and banks are warming up to the idea of tokenizing their money — it saves on printing costs, it’s trackable and nearly impossible to forge, and transfers are instantaneous. Japanese banks are considering a token pegged to the yen, while Venezuela issued its own coin, the petro (which President Nicolas Maduro is currently pushing on airline fuel purchases). China’s central bank digital currency, which may launch in 2020, has a real potential to be used as a de facto alternative to the U.S. dollar especially between China’s trade partner countries.

At this point, one could argue cryptocurrency acts like traditional money with limited controversy. But, as seen in mid-2017, tokens are vulnerable to massive market volatility on the back of bad news, demonstrating their characteristics as an investment unit. Markets crashed in September 2017 after China announced its ban on cryptocurrency exchanges and companies’ new coin offerings, and again later that month when South Korea said it would consider a similar ban on new coins.

What if a journalist was preparing to report news that would send the market crashing? A South Korean financial regulator was investigated after he reportedly sold off cryptocurrency just before the government’s September 2017 announcement, demonstrating the potential benefits from insider information. Even if a journalist does not move markets, reporting on an asset he owns may lead to questions over his impartiality. Regulators’ and journalists’ influence over movements in the volatile cryptocurrency market is real and a valid argument to ban them from cryptocurrency ownership. But this reasoning may fail the test of time.

The discussion gets even more complicated because other tokens have different uses. A growing number of tokenized products are emerging that are only tradable through cryptocurrency. Take, for example, CryptoKitties — a phenomenon that took the Ethereum network by storm in 2017 as people paid tens of thousands of dollars for unique digital cats, heralding an era of tokenized collectibles. But as they are only bought and sold with Ethereum, would journalists be banned from buying one of these not-so-cuddly crypto-critters? Or, when playing video games that sell in-game purchases through crypto tokens, would they be banned from buying weapons or armor?

Tokens can also represent contracts for an asset with existing value, like a house, car or painting. When more serious blockchain applications are taken to market via cryptocurrency such as purchasing land titles or art, would it then present ethical issues to engage?

Utility tokens, another type of currency, represent a future product or service. They can function like a coupon or loyalty program, and may help companies raise funds. In contrast with transactional cryptocurrencies that users decidedly acquire, utility tokens may ease their way into our lives without us ever realizing it: Coffee shops, department stores or airlines may issue rewards points as digital tokens, which users might also be able to easily trade with other cryptocurrencies. If journalists, then, held tokens of franchises that utilized blockchain-based rewards points, would they be banned from covering them?

Utility tokens do not allow holders an ownership stake in a company’s platform or any other asset. Equity tokens, on the other hand, are offered by a company and give investors partial ownership and certain voting rights. They are considered investments with an expected return and, because of their ease of transaction, becoming a popular — however dubious — method of crowdfunding. The Securities Exchange Commission applies the four-step Howey Test to classify tokens as securities: It requires a monetary investment, there is an expected return on the investment, the money invested is in a common enterprise, and profit comes from the efforts of a promoter of a third party.

Although much of the dialogue around cryptocurrency ownership is about Bitcoin and other transactional tokens — soon potentially including Facebook’s Libra — ownership of equity tokens is actually where the biggest ethics question for journalists should lie. Financial journalists are historically banned from owning stocks in companies they cover to prevent conflicts of interest, and it is not a stretch to predict the same conflict could be present with equity tokens.

In a way, the ethics are not about a token’s characterization, but its intention. “The fact that it’s currency or stock doesn’t have anything to do with the fact that it presents a potential conflict of interest,” said George Calhoun, member of law firm Ifrah PLLC. “What is material for conflict purposes is whether or not a journalist has a material interest in how that asset performs. And it’s an asset, whether it’s a security or a currency.”

Today’s tech and business media companies have different ways to draw the line. The Verge forbids its employees from “owning or trading in cryptocurrencies like Bitcoin.” Tech in Asia allows journalists to own up to $200 of a digital token: “It’s primarily to allow journalists to familiarize themselves with the process of owning and using crypto. … I don’t find that owning a small number of tokens will influence a journo’s coverage of the blockchain space,” said chief editor Terence Lee. TechCrunch requires the writers’ ownership disclosure on relevant articles.

CoinDesk, which exclusively covers cryptocurrencies, bars the entire staff from editorial to business from buying a coin and selling it off within 30 days to prevent short-term flipping, and employees must declare to management any investments above $1,000. On the other end, LongHash, a media startup covering blockchain, pays its writers in Ethereum.

Wall Street Journal reporter Paul Vigna said there is no formal policy on cryptocurrency ownership, but it is treated as any other speculative asset that one can buy and trade. As the Bitcoin-beat reporter, he cannot buy or sell anything cryptocurrency-related, a policy shared by news services including Bloomberg and Reuters. “I will say, too, that’s a policy I agree with. I don’t want my personal financial interests interfering with my reporting,” Vigna said. “Some day it’s possible that Bitcoin or some other crypto will be so widespread that holding it will be the same as holding any other currency, but we’re not there right now.”

Unfortunately, attempting to determine which cryptocurrencies are ethically OK to own would be virtually impossible because the industry changes so quickly. Bitcoin as we know it will evolve vastly in 10 years, both practically and technologically, and thousands of new coins are introduced each year — functioning in unique ways, from currencies to securities to rewards-like utility tokens.

“The Chuck E. Cheese discount program — does that count as a disclosable cryptocurrency if it goes into a digital currency … and then I can’t cover pizza joints? I can see this becoming a logistical nightmare,” Calhoun said. “We’re going to see more and more things moving onto the blockchain, and a lot of them are not going to be investment assets.’”

Another issue is practicality. In today’s industry, supply is narrow of journalists who understand blockchain and cryptocurrency well enough to cover it beyond surface level. Among those who are interested in the technology, many purchase tokens, leaving few to cover it without conflict of interest as defined today. Leaders in the blockchain space, such as cryptocurrency exchange Binance CEO Changpeng Zhao, disregard journalists who have never purchased a token or experienced the industry firsthand.

Given the clear potential conflicts of interest, rules on journalists owning cryptocurrency are warranted. But it may be futile to determine a uniform guideline. “I don’t think hard and fast rules make sense because this area is changing so fast. But I do think disclosure is important, and it’s important for journalists to maintain their ethical independence,” Calhoun said. “A determining factor is: What type of outfit does a media outfit want to be? Does it want to be one that sells itself as impartial reporters of the news and take steps to show that our reporters don’t have an interest in the stories they cover? In that case, a ban might make sense.”

There is no one ethics code, then, to suit all outlets. Writers for cryptocurrency-related outlets are almost expected to own tokens, while legacy outlets are known for stringent ethical standards that would ban any such activity. “People understand when they’re listening to an industry mag versus one of the hypothetically neutral newspapers of record,” Calhoun said.

Media could follow the government’s suit, Calhoun suggests. The U.S. Office of Government Ethics issued a June 2018 guidance labeling virtual currencies as an investment asset and requiring that employees disclose their cryptocurrency ownership.

Indeed, cryptocurrencies might one day become so ubiquitous that banning ownership would not make sense. Blockchain specialists predict that as companies increasingly recognize the technology’s possibilities, loyalty reward-type currencies will merit everyday use. They believe blockchain will develop to a point where, like the internet itself, we will forget what we did without it. Even today, iPhone users can link both their bank account and crypto account through Apple Pay Vault — why would it matter which one a journalist uses to buy a slice of pizza?

“The short summary would be, it makes sense from my perspective to treat them like any other asset. If you’re telling a journalist that under any ethical standards, ‘You can’t report on anything you invest in,’ then they shouldn’t invest in cryptocurrencies,” Calhoun said. But that should not block them from owning tokens for payments or rewards, as they are not considered investments.

Blockchain will impact industries in ways that are still being imagined — including in journalism, where projects like Civil, Steem and Everipedia claim to use it to incentivize the truth. In these cases, cryptocurrencies would not create conflict of interest, but rather help journalism’s mission.

Civil’s communications lead Matt Coolidge said its token is used to “drive economic activity in a network that’s trying to become a widely trusted home for ethical journalism” by creating checks and balances for news credibility. Journalists receiving cryptocurrency is part of Civil’s paradigm. “Sending CVL to a journalist to express your gratitude for an especially well-written story … should be taken with an eye towards promoting ethical journalism,” he said.

Time will tell whether these experiments succeed, but their existence suggests the intersection of journalism and blockchain is inevitable — as well as the need to adapt the way we view digital tokens.

Media outlets have time to update their ethics as cryptocurrency adoption is relatively slow — particularly in the U.S., where the dollar is trusted, electronic payments work well, and cryptocurrencies are cumbersome to purchase. We may see countries in Asia and emerging economies like Costa Rica that have adopted cryptocurrency more rapidly than the West to be first to develop a mature stance on crypto ownership. It would not be a surprise, then, for the non-Western world to lead this change.