In a widely reported development, Coinbase is working with charity Give Directly to provide 160 New Yorkers with $12,000 worth of the stablecoin USDC over six months.
The first payment is worth $8,000 with recipients set to receive $800 each month after that.
Coinbase and GiveDirectly are calling this a pilot program for what’s known as Universal Basic Income (UBI) — or a sum of money that will be provided to everyone so they can afford shelter, food, and other necessities as jobs begin to dwindle with the advancement of artificial intelligence and robotics.
But is this actually a UBI pilot program? The short answer is no.
UBI has been examined and experimented with numerous times before. Indeed, negative income taxation was tested in the US and Canada in the ’60s and ’70s with mixed results.
Later, pilot programs were initiated in numerous countries. Iran even adopted the concept entirely in 2010, though it’s seen mixed results (the subsidized incomes resulted in largely beneficial results but runaway inflation from sanctions, war, and civil unrest in Iran has offset those benefits).
Corporate AI executives, venture capitalists, and other billionaires have suggested that a UBI needs to not only be considered, but completely figured out within a few years because many of the jobs we rely on as a society — from garbage collectors, to doctors, therapists, to programmers, writers, to artists — will soon be fully replaced by AI, giving humans very little to do.
The fear for the ultra rich and powerful, of course, isn’t that people will be unable to afford shelter or take care of their families, but rather that “idle hands are the devil’s workshop,” and a huge percentage of an unemployed population may very well revolt against the ruling class.
It’s impossible to know if this is a pipe dream to amass more government contracts and personal wealth for individuals living within the upper echelons of Western civilization or if there’s actual dire concern behind the desperate calls for UBI.
Nonetheless, a 160-person experiment providing $12,000 for poverty-stricken New Yorkers isn’t the answer.
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Universal Basic Income: the problem is in the name
What the term “Universal Basic Income” implies is that most fundamental costs — rent, food, and transportation — will be covered by the subsidy.
The reality is that $12,000 over six months barely provides enough money to cover the median rent in New York City (which is $1,600, even with rent stabilization and public housing policies).
With the leftover cash, a recipient of the $12,000 in USDC could only hope to partially pay for food and transportation over the following six months. A proper UBI experiment would provide New Yorkers with far more than $12,000 over six months, though it would be difficult to determine a precise number.
If we combine the median price of rent, the average cost of food, and the cost of riding the subway, the number would likely fall somewhere around $16,000 — likely more if we factor in other costs like utilities, cell phone charges, and the price of home internet.
If this figure is more accurate, Coinbase’s UBI program looks to fall at least 30% short of proper UBI in New York City and possibly up to 50%.
If it’s not a UBI pilot program, what is it?
What Coinbase is offering is more akin to a $2 million marketing campaign than any sort of UBI pilot program.
While the company is indeed working with a very real and noble charity in Give Directly, the requirement to have a Coinbase account, accept the payment in a stablecoin as opposed to cash, and the incentives provided for keeping the stablecoin payment on Coinbase instead of taking it off platform suggests less altruistic reasons for the program.
Recipients of the stablecoin payments will have few, if any, restrictions placed on them upon receiving the aid.
Indeed, it will instantly allow them — through the very Coinbase account they’re required to have — to fritter and gamble away their free money on shitcoins, NFTs, or other speculative investments that often go to zero.
Alternatively, they could choose to keep the USDC in its stablecoin form and lend it out on Coinbase, where they’ll be provided with an extraordinary 10.8% interest rate — but with extraordinary interest come extraordinary risks that poverty-stricken New Yorkers are likely unfamiliar with.
These two avenues of spending alone provide Coinbase with a huge opportunity to recoup a lot of the money it’s providing to these individuals in the first place. But that’s only the beginning.
Since announcing the pilot program dozens of positive articles have been written about Coinbase and its new plan to help the needy in New York. Even many of the more skeptical write-ups have focused on recipients enthralled with the prospect of receiving $12,000 in no-strings-attached stablecoins.
These people are surely telling family and friends about this amazing gift from a US crypto exchange — an exchange they should sign up for because it’s providing for Americans and helping New Yorkers who don’t have enough.
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However, the program could also be a not-so-subtle attempt to erase memories of Coinbase’s past sins.
These include keeping customer funds on Bitfinex when it was hacked, acquiring controversial Israeli security company Unbound Security, and Brian Armstrong not allowing employees to discuss politics while very openly making company decisions based on his own personal politics.
This isn’t a government-run program designed to simply provide for those in need.
It’s a corporate marketing and propaganda campaign specially tailored for a fast-moving news cycle and designed to provide Coinbase with cover for its earlier mistakes.
Protos reached out to Coinbase for comment and will update the article if and when it responds.
