Common Carrier?

Should payment processors and currency ``warehouses'' like banks be neutral parties that only ensure that the transaction itself involves real parties, or should they also police transactions based on legality? Addendum question: if the answer to the previous question is ``yes on policing transactions on legality'', then the next question is, what about transactions that are not inherently illegal, but may be due to external morally questionable activities that are not ruled illegal?

In general, the main idea involved in payments is the concept of ``legal tender''. ``Legal tender'' these days refer to fiat money, but the reality is that it just refers to forms of money that courts of law are required to recognise as satisfactory payment for any monetary debt (see first sentence of Wikipedia article on ``legal tender''). ``Monetary debt'' itself is interesting in that it does not specify if the activity that incurs that debt between parties has to be legal or even morally questionable, though if the said activity itself is illegal, it usually means that there is no recourse from the courts of law to enforce the payment of this debt.

If we are referring to physical bank notes, then there is usually little to no ambiguity about the status of them being ``legal tender'', and therefore their use in handling any monetary debt is in no doubt.

The question becomes significantly murkier once we get into the digital world of payment networks.

The problem here is that there is nothing physical about the ``money'' that is used throughout the payment networks---it is literally book-keeping in its most abstract form. It is a more complex version of the model of fractional-reserve banking that is used these days, where a bank may have more assets in its books than actual money due to how it hardly ever keeps any money in its vaults, preferring to lend them out for interest in return. The big reason why the bank does not crash is usually because of the trust put into it by its depositors/account holders---they trust the bank enough to put their money inside, and not want to withdraw all of it at once. That's why bank runs can be a thing that happens when trust runs low.

But as usual, I digress.

The point here is that payment networks are fractional-reserve banking systems taken to a different extreme. Payment networks themselves act as brokers between the various sources of funds, facilitating transfers between the sources in a sort of ``highly optimised middleman'' sort of way. For most people, using a payment network is no different from using physical cash to pay, the only difference is that instead of physically transferring bank notes from one person to another, a number is deducted on one end, and that number less transaction fees is credited to the other end, with the net result being functionally equivalent to a payment being enacted.

The big difference here though is that the physical cash (or bank notes) is 100% non-judgemental---it works between two criminals the same way it works between two normal people; it works between two morally questionable people the same way it works between two judges. The effort to make physical cash ``judgemental'' is too costly to be applied---the life cycle cost of the physical cash usually needs to be much cheaper than the face value of the physical cash for it to act as a good enough representation of the fiat value; adding any sort of tracking to it will require hardware that is simultaneously that sophisticated, have a small foot print, robust enough to survive the abuse physical cash goes through, and still be cost effective. Yeah, that's not happening.

But payment networks have no such issues. All transactions are logged already, either for regulatory reasons or for system robustness/integrity maintenance. At any one time, the payment network knows exactly which account is sending how much to another account---it is literally what they do.

The problem comes when these payment networks themselves are companies with associated shareholders, or to be owned by any parties with vested interests and an activist slant, really. When given the right nudge, these payment networks can suddenly start refusing to process payments from/to any particular accounts---it is well within their legal right to do so, regardless of whether the transaction stems from illegal activities. As long as there is no common carrier law governing these payment networks, they are effectively private contract carriers, and as such, can set any damn rules they want to discriminate whoever/whatever they want.

``MT, why are you suddenly so vehement about this?''

Because there has been news every year about how some legal but morally questionable pornography companies are seeing their bank accounts blocked/terminated, and their payments to their employees barred by various payment processors, when previously there was no such problems. This is a problem because over the past fifteen years we have relied increasingly heavier on such payment processing networks to handle our transactions as compared to before.

With Internet shopping, much of what we buy is paid has to go through some kind of payment processor. If they are allowed and/or nudged by their shareholders towards discriminating the types of payment they want to process, then the world needs to be made aware of them (i.e. ``name and shame''), because a certain amount of trust can be considered lost---we do not usually think of our payment processors as having any sort of discrimination in terms of the moving of our money when they always earn from the transaction fee anyway; in many ways, their discrimination of payment can be seen as being perverse to their business sense, since the more transactions they can process directly contributes to the revenue.

Today it may be morally questionable pornography companies, tomorrow it might be a minority group that is trying to fight for better rights for their people, and the day after it might even be a company/group/service that one might want to pay them for whatever they might offer. It's a slippery slope all the way down.

I think that for a lot of things that we are taking for granted as being non-discriminatory in nature will probably need to have their neutrality codified into some kind of law before strange and awful things happen, i.e. the conversion of de facto into de jure. It is not because I'm a legalist, but because we need to be clear and aware of non-physical infrastructural elements that our societies rely on to avoid the metaphorical having our balls caught in a vise when formerly good faith custodians turn bad.

This is the side effect that comes from trying to shift entire societies to new ways of operating---the shift is incomplete and irresponsible when the infrastructure (both physical and non-physical) that these new ways of operating rely on remain unregulated to remove discrimination.

Because in the end, anything that does not have neutrality baked into its regulation will end up developing discriminative practices in it, and at that point, it suddenly becomes a new schism for yet another class divide that further splits up society as opposed to healing it.