Senator Elizabeth Warren is a crusader against large banks and is not a fan of Bitcoin. The self-described protector of the small guy doesn’t want uncontrollable access to finance, whether it is because of the environment or the economy.
It’s not unusual for her to be so. There is rarely a reason why politicians don’t like Bitcoin. They’ve had. AllThey will take advantage of any and all reasons available, but they’ll be focusing on the one that is the best or most relevant at the moment.
It’s war right now. Hillary Clinton trotted out to poke fun at crypto exchanges which did not ban all Russians extralegally from their services. Janet Yellen (Treasury Secretary) is investigating cryptocurrency and “monitoring its ability to give aid or comfort to the Ruskies with the small caveat that it is not a “prohibited sector”. [not]It is completely possible to evade certain things.” Federal Reserve Chairman Jerome Powell did admit that he had no knowledge of bitcoin being used to evade sanctions, but struck while the iron was hot, stating that it nevertheless “underscores the need” for a “regulatory framework” on cryptocurrencies, which … already exists (and is already way too onerous).
Senator Warren, however stole the spotlight with her fearmongering regarding bitcoin and sanctions during the Senate Banking Committee hearing “Understanding The Role of Digital Assets In Illicit Finance”. Before answering her witnesses, she said first that “crypto” was an alternative payment method for cheats and criminals. laying out a hypotheticalA Russian billionaire could do this.
Problem is, her hypothetical didn’t make sense. Chainalysis representatives were the ones she asked. Chainalysis is a Blockchain forensics firm. A blockchain forensics firm, who get handsomely paid to create new tools for tracing digital money, might exaggerate this cloak-and dagger image of transactions on blockchain. These companies are the best at determining what blockchain transactions can be tracked. It would be difficult for Russia to get around billions of sanctions using Bitcoin.
Sen. Warren believed that any transaction could be removed from the blockchain by a service called a mix. Chainalysis’ representative countered her by pointing out that mixing services have a daily liquidity of only $30 million and that companies that specialize in blockchain forensics are routinely capable of unmasking transactions sent through mixers. Warren continued to be surprised, but she didn’t stop.
Technology isn’t magical. While bitcoin is touted as allowing people to transfer money around the world, many don’t know that there are limitations.
Russia can’t use Bitcoin to get around sanctions. This is because it isn’t a deep enough market to support the necessary financial volume. Russia wouldn’t want to lose the currency it has been trying so hard to protect by buying that much bitcoin. Elizabeth Warren and other critics respond that Russia could seperate the transactions into smaller amounts. It is still necessary for a counterparty, most of whom comply with the existing sanctions against regulated financial intermediaries to be able to sell those transactions and arrange them appropriately. Russia will not buy gift cards from Walmart worth $500 to transfer money.
Washingtonians who are serious about the issue know that crypto isn’t an option for Russia and other countries to avoid financial sanctions. Any headline claiming that cryptocurrency could be a tool for sanctions evasion will appear in any newspaper. Many high ranking government officials will tell you that Russia can’t realistically avoid sanctions using cryptocurrencies. Even though people won’t actually read the articles they will still remember the headlines. The demagogues don’t mind spreading the myth that crypto is fueling evil. This is how misinformation spreads.
The confusion will be used by politicians to push for new control on us all. Warren revealed her latest hobby horse, the Digital Asset Sanctions Compliance Enhancement Act. It’s quite a few words to use when Warren says that “we are unconstitutionally going after persons who publish code or run it.”
This bill will punish actors who have “significantly and materilly assisted, sponsored or provided financial material, technical support for or goods or service to support any of these activities.” [sanctioned] person.” If you are a member of peer-to–peer networks, this means any person who creates or runs the code to facilitate a transaction. They can’t stop the sending and receiving of money, even though they are unable to do so..
It is not new to try and punish criminal actors within a distributed network in order to penalize them for their crimes. This is the basis of almost every negative policy in cryptocurrency. Like all others, it should be stopped.
However, the gripes of anti-bitcoin politicians go beyond just sanctions evasion. The idea that any Russian government or individual can use cryptocurrency is not something they like.
Russia may accept Bitcoin for oil trades, according to new paranoia. The source of this panic was a throwaway comment by Russian legislator Pavel Zavalny that Russia was open to letting “friendly countries”—like China and Turkey—pay for gas in whatever currency they’d like, including bitcoin, but more likely yuan and liras. All the rest of the world that is not friendly must by Thursday pay in rubles.
Not because some random Russian politician spoke the term “bitcoin”, like our press would have us believe, but rather because Russia is moving away the “petrodollar” as the currency of international crude oil exchanges.
Russia will naturally move away the dollar. Russia has been sanctioned and restricted in their ability to access dollars by the U.S. The ruble has been falling steadily for some time. The Russian currency’s value will be supported by a mandate for demand.
It is not bitcoin’s fault. Because of the actions taken by the U.S. authorities, governments all over the globe are losing faith in the dollar. The U.S. authorities have clearly armed their global financial levers, which is why other countries are closely watching.
Not surprising, the U.S. would use its global reserves currency powers to attempt to curtail Russia’s activities. Most striking was the West’s decision to stop Russia from withdrawing $630 billion worth of foreign currency dollars and gold. Although it was not a wise move from Russia to leave that vulnerability open, perhaps this shows how outlandish they believed their move was. According to one financial analyst, the decision to freeze Russian assets was a “nuclear attack in global finance”
The U.S. has more to do than that. Our authorities have also made clear their displeasure with marginal countries—the “friendly countries” in Russia’s terms—for not following the leader. These formidable nations already had a lot of goodwill. You can’t help but feel resentful and desperate for an escape.
Joe Biden has already admitted to the public that U.S. sanctions against Russia will result in Food insecurityIn the U.S. as well as abroad. Hungery populations don’t make happy people, and nations around the world have not become as dependent on the dollar or NATO as the United States.
Russia is no global economic slouch, with the considerable portion of oil, fertilizer, and metals—key productive inputs—that they contribute to global markets. Some countries may agree with them if they suggest that you pay anything other than the dollar. Perhaps they’ll get an idea of other areas in the world where dollars are not as important.
Saudi Arabia has already stated that it is considering accepting the yuan instead of dollars for Chinese oil sales. Note: Yuan is not Bitcoin. These two countries had nothing to do the invading Ukraine. Yet, the conflict has accelerated their departure from the dollar.
The establishment has a problem, and they don’t have the resources to fix it by shaking hands with bitcoin. The economic trends and geopolitical developments that have been brewing for decades have nothing to do bitcoin. Cryptocurrency is a tool that can be wielded in different ways—most importantly as a way for innocent people to protect their finances and privacy—but it’s far from a causal factor in this latest chapter of the Great Game.
I don’t think we will witness much soul searching by those leaders with the power and ability to make decisions that are effective. Anti-bitcoin fearmongering is what we can expect.