As reported on July 6th by Coindesk, over 75 blockchain startups have received PPP loans from the U.S. federal government since the COVID-19 pandemic began. More notable recipients of the loans include IOHK, Consensys, Electric Coin Company, and ShapeShift.

The PPP (Paycheck Protection Program) program was created by the Trump administration to provide financial assistance to small businesses who may have otherwise laid off employees due to the crisis.

As per the U.S. Small Business Administration, the loans will be fully forgiven if the funds are used primarily for payroll costs.

Cheritable Financial Assistance or Unjust Wealth Transfer?

The recipients of the loans could very well have suffered from financial hardships that would have led to layoffs had they not received government assistance. The money may very well have ended up in the hands of diligent employees who are actually working on valuable projects.

There are two big problems, however. First of all, the government has no money to give! And secondly, they are picking winners and losers in a supposedly free-market.

The U.S. government is broke. In fact, they owe a total of $26 trillion dollars to their creditors! They only have two ways to fund these PPP loans:

1. Take money from productive businesses in the form of taxes
2. Print cash out of thin air, debasing the value of all existing dollars.

It could be argued that this is essentially a redistribution of wealth, from productive businesses and prudent savers to some privileged startups deemed worthy by the government.

Bitcoin Maximalist and free-market advocate Max Keiser called out some industry leaders, including IOHK CEO Charles Hoskinson, for accepting the loans:

While opposed in principle to the PPP program, Charles argued that he would be putting IOHK at a disadvantage if he refused to accept a loan that his competitors were applying for:

The small loans these crypto startups will receive pale in comparison to the recent bailouts given to the mega banks and corporations, but the principle remains the same. We have a central authority choosing who wins in a supposedly free-market.

Bitcoin's Purpose

Bitcoin was created during the financial crisis of 2008, right when the central banks launched Quantitative Easing, a monetary policy that has centralized the banking system and created a massive wealth gap between the rich and poor.

The genesis block of Bitcoin is inscribed with the famous quote "Chancellor on brink of second bailout for banks". Satoshi Nakamoto saw that governments worldwide were transferring wealth from citizens to banks and came up with a brilliant solution that enforces the property rights of individuals.

Cryptocurrencies have been designed to prevent the redistribution of wealth between individuals by a central party, which is exactly what this government program does.

Government Handouts Weaken Businesses

It could very well be that the startups that accept the PPP loans will be weakened instead of strengthened, as they are now slightly less reliant on their own tenacity to expand and raise capital.

Government handouts tend to make people and businesses complacent. The beneficiaries become evermore dependent on the hand that feeds them, instead of coming up with new and innovative ways to provide value.

Ideally, the crypto industry should be a meritocracy where the most productive projects attract investment organically. In the end, businesses that are inventive and self-reliant will come out on top.

Sources: https://www.publicdomainpictures.net/en/view-image.php?image=349475&picture=loan-approval https://www.coindesk.com/consensys-polychain-tron-ciphertrace-blockchain-startups-got-18m-in-us-ppp-bailout-loans https://www.npr.org/2020/07/04/887322386/trump-signs-small-business-loan-program-extension https://www.sba.gov/ https://www.usdebtclock.org/