question about crypto, swift and sanctions
Currently, I just have invested 2500 in some stocks, funds and crypto. Mostly as a learning experience, but hopefully as a better piggybank than my bank account. I am willing to take losses, as long as I can learn from them.
But this question is not about that. Just like the former US administration, Harris/ Biden seems to be a one trick pony, threatening sanctions everywhere. Eventually, non allied states will find their ways to circumvent and create independent channels.
(nobody could ever convince me that a country under sanctions does things wrong! They can always say it is all due to the sanctions, and who can argue against that???).
I would say that sanctions are bad, counterproductive and thus very stupid- always!
I understand that Swift (international transfers, credit cards etc.) underlies the international banking system. Some countries, like Venezuela, Iran and Cuba, are cut off from swift. Are cryptocurrencies independent of sanctions? Are they sanctionable at all? The role of them might then change dramatically if for example Russia or China would be cut off from swift after sometroubles near Ukraine or Taiwan.
Sanctions could be compared to years of lockdowns: in the end it promotes more contagious strains!
Well, at least Iran, Turkey, No. Korea, Syria, China, Russia, and Venezuela are already conducting transactions apart from Swift and despite sanctions. The EU countries created a Special Purpose Vehicle to allow it to technically follow Swift regulations while actually circumventing it. See here.
Venezuela has apparently been using at least bitcoin, and they say all manner of cryptos, to bypass US sanctions. See here.
Turkey and Iran have a bilateral agreement that bypasses sanctions that dates back a couple years. See here.
China has been establishing a series of bilateral agreements as part of its Belt and Road Initiative all across the globe. Here. Here. In the second article is mention of China’s emergent digital yuan being part of the effort. And, btw, China has been stocking gold for at least a decade; imagine the digital yuan backed by gold – that becomes a viable threat to the ever-diluted USD, as both currencies trend from here. Russia has done similar stacking, as has India and many countries, especially 2nd tier economies. They’re all positioning for a post USD-dominated world. Here.
As for cryptos in general – in principle the US could sanction any company that does anything the US government thinks is against the interests of the US. So it could threaten, sanction, or shut down any cryptocurrency that has an individual, company, or group at the center of a coin’s system. Coinbase, for example, could be required to freeze all Coinbase wallets, or to limit amount withdrawn, or to freeze certain coins but not others, or to forbid transactions involving sanctioned countries or businesses or individuals. Ditto Ethereum; or banks, hundreds of which will be hosting cryptocurrencies by the end of 2021 (here).
The exception is bitcoin, especially hosted by oneself. The coin itself cannot be stopped because there is no entity against which to issue sanctions or onto which to apply pressure. It can be made illegal to hold, or to transact in it, but that will only have the effect of weakening US authority in the world – diluting interest in accommodating the US more than is happening now because the US overuses sanctions. Sanctions will not stop bitcoin, they will only cause US entities to fall behind the world’s move into crypto generally, and bitcoin as internet’s base layer of money (ie, digital gold) in particular.
Still, Coinbase or Kraken or whatever company could be ordered to stop all transactions in bitcoin that go through their exchanges, and to freeze wallets held on their platforms – which is why every bitcoin holder needs to have their own wallet, and their own node. Nodes allow direct access to the bitcoin network, removing the exchanges as places of choking bitcoin’s access and use. (Having a node also strengthens the bitcoin network against governmental threats because the more nodes that are spun up across the globe, the more distributed is the leaderless, center-less network that IS bitcoin.)
There’s no question that a determined government could hunt down very many private wallets and nodes and shut off individuals’ and companies’ access to the internet, or even shut down US access to the worldwide web, but at what cost vs. benefit? (And, too, bitcoin’s network can be accessed via satellite, which is much harder to shut down.) If we get to that point, we’ve got really big national problems. (I don’t think we’ll get there.)
I predict we will see more countries turn to bitcoin as a means of conducting international trade. Nigeria is already doing it at the P2P and B2B levels with countries like China and India (among others) because btc is inflation resistant, unlike Nigeria’s native currency, the naira. Here.
Countries like El Salvador have given up their national currencies and gone to the dollar. However, the devaluation of the dollar through overprinting is causing hardship for El Salvadorans, who also rely on remittances from family in the US. Right now, Strike is helping the 3000 residents of two remote coastal towns spin up a bitcoin-centered economy as an experiment. Here. Soon the same capabilities will be expanded to the EU, then across the US. Additional features will follow.
This global trend is not something the US can stop. It would be foolish and self-damaging to try. State cryptos will not prove to be viable substitutes because they will have all the problems fiat currencies have, plus additional powers will be put in the hands of bureaucrats to manipulate their moneys and control their citizens’ spending.
Relatedly, the alt-coins are quickly falling further behind bitcoin in terms of the global adoption curve; the gap will increase ever more quickly as new applications roll out on bitcoin’s layer 2 over the next couple years. Bitcoin network effect and adoption is already past the “slowly at first” stage, and is entering the intermediate stage before “then suddenly.” It’s akin to the “case, case, cluster, cluster, boom” concept Chris shared as Covid was spreading last spring and summer. We’re still in “case, case,” but getting close to “cluster.”
This on-the-ground reality has me fully invested in bitcoin, and shunning the alts despite their temporary value spikes – that come around every four years on the coattail of bitcoin’s post halving boost anyhow).
Thank you VTGothic. That is a lot of valuable information!
This is very educational content and written well for a change. It’s nice to see that some people still understand how to write a quality post! Beard Nation
Congressman Mark Green has invested in crypto