Headline: Is cryptocurrency used in the porn industry?

Body:  OK, this one is a little kinky.   On a lark, I threw out the idea that cryptocurrency might  be a  part in the “adult entertainment” industry.    Well, as it turns out, it is involved, intimately.  I suppose this shouldn’t have been too much of a surprise because porn is often on the leading edge of many technologies.   (How do you think we began to have coinage?}  Yet, still, I was somewhat surprised.  Perhaps you will be too.

Why might the porn industry want to embrace cryptocurrency?

1.  Digital payments are difficult to stopà Sometimes there are politicians who claim to want to “clean up” this district  (Remember Larry Craig?)  Digital payments would make sex workers less dependent upon the whims of the latest politics.
2. There is already history here.  Litecoin can be used on Pornhub, and there is some evidence of other porn-related cryptocurrency like $SPANK.  On the $SPANK blockchain, one can purchase sexually-explicit NFTs.  
3. Porn is fairly specialized , so, the same guy is likely to go to the same sites.    Thus, if each site has their own coinage, this would still be practical for both the  user and the website owner.
4. Even a place like Pornhub has some sexual-related fetishes that they won’t display.  (This is difficult to fathom, but then I watched Law & Order SVU and I was then informed that I was niave.)  If a performer wanted to do these things, they could accept payment in cryptocurrency themselves, and be completely independent.
5. Use of cryptocurrency allows for a certain degree of ‘anonymity. 
6. Within a democracy, it seems to be a good thing most of the time, to “push the envelope” of what is legal v. what is not.
7. Venmo, Paypal and Square can decide suddenly not to process payments.   There was one sex worker (who is now a major cryptocurrency advocate) who was red-flagged from all 3, and she began to accept  only cryptocurrency.  In another episode, a porn actress had all of her credit cards declined.  When she called customer service, they wouldn’t reveal the problem until they received a written letter from the performer.
8. When one bank decides to stop transacting with a performer, they go to Bank #2.  Then, when Bank #2 decides to stop transactions, they go to Bank #3.   This is called “platform hopping” and gets the attention of the government FINCen computer network.
9. Porn is significantly attractive from a renumeration standpoint.   One ICU nurse (making $84,000 per year) left the profession to make $1.3 Million thru OnlyFans.
10. Recently, OnlyFans rolled out a new policy to not allow sexual content.   Due, ostensibly, to loss of business, blowback and potential loss of business, they reversed their policy a few days later.  If the performers accepted cryptocurrency, they could neatly sidestep these policy whip-lash changes.
11. One very large challenge when accepting credit card payments is “chargebacks”.  In this case, a cardholder will claim that they never received a good or service.   Given the ephemeral nature of porn, it is not surprising that many people suggest they never received services.   But, when using cryptocurrency, these transactions are on the blockchain and are immutable.
12. In 2 enigmatic tweets, Elon Musk has appeared to back one porn site that offers its’ own NFTs.

Why might the porn industry NOT want to embrace cryptocurrency?

1.  There is a rather steep learning curve for the performer to learn how to use cryptocurrency.   Interestingly, there also seems to be a wide-spread feeling that Bitcoin should not be used to pay for porn.  These are 2 major problems that the performers are facing now.
2. Coinbase cannot be used because, due to KYC restrictions, these accounts have to be associated with a real bank account, and these performers often cannot get them.

There is a kind of cryptocurrency that rewards people for both creating and  consuming porn.   This is called the Vice Industry Token.  Some might initially laugh when considering that somebody is paid for watching porn (I laughed), it kind of makes sense.  Producers of porn make less than half of their revenue from subscriptions and make the majority from in-place advertisements.  Given this reality, it makes sense that the audience might be rewarded for allowing themselves to be “exposed” to advertising.  Further, by rewarding them in this manner, keeping metrics on the consumers is much easier, and advertisers like this.

Congress passed a law in 2018, called FOSTA, largely in response to the Backpage debacle.    This is an Act that aims to minimize sex trafficking, but many performers complain that they are caught up in the restrictions too.  This is a real problem because it drives the entire industry even further underground, and makes even more abuse more possible.

 The Verdict

“They’ve attacked our banking; our ability to operate like the rest of the world,” explained DiAngelo. “You don’t exist if you can’t use the banking system.”  These are the words of a very well-known porn performer.  And, she is right.   In this country, just think of the cannabis dispensaries who have to spend so much on vaults and security largely because no bank will take their money.   For a larger example, look at Russia.  They were deleted from the SWIFT network and now, they have to look very hard to find people who will do any sort of business with them.   Point is, she is right.

It is a difficult thing to wrestle with.   Our capitalistic society can become so moralistic.    I think the point is well-taken.   If something is not illegal, it is therefore legal.   If the politicians want to outlaw something, they should.    Of what’s left, they should probably be equally accepting.  Once again, I think it comes down to fear.   Mastercard has a fear that sex work on the internet could become illegal, and they are afraid of being associated with the stigma against porn.  Personally, I think they need to take a stand.   Either you’re against porn (and willing to pass up a LOT of money), or ok with porn, and you can enjoy a large new revenue stream.   To do anything in the middle would be to trap a lot of people underwater, financially.

REFERENCES

Should Crypto and Porn Get Intimate? (coindesk.com)

What’s the Vice Industry Token—A Crypto for Porn? (investopedia.com)

Bitcoin a lifeline for sex workers, like ex-nurse making $1.3 million (cnbc.com)

Italian Cryptocurrency Project Plans to Pay Users to Watch Porn (cointelegraph.com)

REFERENCES

Editor’s Note: Please note that the information contained herein is meant only for general education: This should not be construed as Tax Advice.   Personal attributes could make a material difference in the advice given, so, before taking action, please consult your tax advisor or CPA.