Crypto Can’t Fully Cover the Needs of Sex Industry
Bank policies aimed at combating human trafficking became a barrier to the growth of platforms like OnlyFans. Sex workers are turning to crypto payments for salvation, but the digital market isn’t always willing to take the risk.
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How Are Banks Related to Virtual Sex Services?
Interest in cryptocurrencies among adult service users emerged in late 2013. During this time, payment operators began widely blocking the accounts of sex workers. PayPal and Square Cash, not wanting to damage their relationships with government regulators and FBI inspectors, hindered transactions from OnlyFans, Fansly, and webcam sites.
Although the provision of erotic online services is legal in all US states except Nevada, payment providers decided it was not worth the risk. There was a chance that regulators might interpret the posting of “explicit content” as facilitating sex trafficking. They wanted no part in it.
Additionally, banks began denying financial services to virtual pleasure platforms. The Obama administration sent out warnings to banks stating that the virtual entertainment industry had an increased risk of fraud. For the banks' own safety, they were advised to close accounts associated with payments from the sex industry.
In 2018, two laws were passed: the Allow States and Victims to Fight Online Sex Trafficking Act (FOSTA) and the Stop Enabling Sex Traffickers Act (SESTA).
Adult services were equated to weapon and drug trading platforms.
Subsequently, major credit card providers Visa and Mastercard declined to cooperate, blocking the accounts of the largest site, Pornhub. Major banks and payment agents distanced themselves from the porn industry. Consequently, the payment flow in this sector was almost entirely shut down.
Cryptocurrencies Are not an Effective Payment Solution
By the time these laws came into effect, online erotic platforms had already started using cryptocurrencies. Their clients quickly grasped the transaction algorithms and used crypto exchanges to pay for content views. In 2022, there was a boom in digital payments on pornographic platforms.
However, problems arose. Centralized Exchanges (CEX) wanting to operate in the US market had to ban accounts of erotic sites and virtual romance workers. If they didn't, they faced massive fines from the FBI. Big names like Gemini, Kraken, and Robinhood announced that all their clients would undergo a standard risk assessment process, considering the industry they work in. These restrictions even affected P2P platforms.
Additionally, sex workers faced challenges in cashing out. Even if they somehow managed to accept a payment, converting it to dollars became a cumbersome task. Transfer amounts were capped.
One of the OnlyFans video makers commented on the situation: “You quickly [run out of exchanges], so you sit on a lot of useless money. The whole ‘crypto is permissionless and censorship-resistant’ thing is a bunch of bullshit.”
This highlights the ongoing battle of online platforms and service providers against the regulations and policies, which not only hampers their business but also points to the limitations of cryptocurrencies in ensuring complete freedom from traditional financial systems.
OnlyFans and Cryptocurrencies. Source: Cryptopolitan
The principles of inclusivity, anonymity, and freedom that the crypto community advocates for didn't work in the case of porn industry. This applies to centralized crypto exchanges that can't operate fully without intermediaries like banks and payment companies.
Currently, adult entertainment platforms are exploring DeFi platforms. Streaming platforms based on the Ethereum blockchain are also being developed, promising unconditional protection of participant's personal data and reliable payment solutions. However, both SpankChain and LiveStars have already faced problems with funds withdrawal and unjustifiably high fees during payment processing.
How quickly will security agents reach these controversial havens of safety is unknown to anyone.
Therefore, cryptocurrencies cannot yet be considered a reliable tool to liberate the porn business from state pressure.
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