Countries around the world are tightening restrictions on their citizens’ bank accounts. Bitcoin is the best way for people to protect their money.
This is an opinion editorial by Craig Deutsch, organizer of Asheville Bitcoiners, designer of The Bitcoin Game and junior editor at Bitcoin Magazine.
You may have seen or heard about people in Lebanon robbing banks for their own money. They’re no Butch Cassidy, but are just trying to get their own money out of the bank.
Lebanon is facing an economic crisis and banks responded by locking depositors out of their own accounts. As a result, multiple banks have been held up by their customers, who are only looking to withdraw their own money.
In late June 2022, G7 countries famously froze around $300 billion of Russian central bank funds, including $30 billion of Russian oligarchs’ assets. Ethiopia’s central bank is banning foreign currency from being used in local commerce and is lowering the threshold for the amount of time that residents who are returning to the country can hold foreign currency. Taiwan is facing significant capital outflows and is floating the idea of foreign-exchange controls if the trend continues to worsen. Mongolia’s local banks are restricting the amount of dollars their customers can buy to $300 per day due to their foreign currency reserves being down 40%. Russian citizens are flocking to banks to withdraw their funds and the waiting time is two to three days.
Similarly, financial surveillance and censorship continue to advance. Even transferring money within the United States has its risks. PayPal has expanded its “Acceptable Use Policy” to threaten users with fines of $2,500 per violation. The company is no stranger to freezing client funds. In January 2022, three users filed a federal lawsuit for locking them out of their accounts without cause. More recently, the payments company shut down accounts of the U.K.-based Free Speech Union. (Authors’ note PayPal quickly reversed course when it became clear that many users were shutting down their accounts in response to this new policy.)
I think you can see the trend.
Capital Controls And Capital Flight
People will always find ways to protect their wealth.
It is well known that there are certain countries that have more favorable privacy and tax customs when it comes to banking. With the release of the Panama Papers and the Pandora Papers, finances of current and former world leaders and more than 100 other politicians were released to the public, proving that the wealthy elite have ways to store their money in offshore accounts and shell corporations, while everyday people are locked out of their bank accounts.
The reality of capital controls is becoming more and more apparent as global tensions heat up. When Russia first invaded Ukraine, there was a story about the wife of a wealthy politician getting caught fleeing the country with suitcases full of dollars and euros. I already listed plenty of examples of countries tightening their citizens’ monetary leashes. It is only a matter of time before people recognize that bitcoin is the solution to monetary restrictions and outright control.
Bitcoin Knows No Borders
“There are a number of reasons why cross-border payments may be delayed or held up. Firstly, not all account balances can be updated outside the operating hours of local settlement systems. Delays can also arise if compliance checks need to be carried out, especially when a payment passes through different countries and jurisdictions.”
Let’s unpack SWIFT’s statement and compare it to Bitcoin:
“Firstly, not all account balances can be updated outside the operating hours of local settlement systems.” Bitcoin runs 24/7, 365 days per year. It has been running almost nonstop for over 5,000 days. It is possible and common for users to send money outside of typical business hours, on weekends and holidays. Bitcoin settles transactions with finality in blocks nearly every 10 minutes.
“Delays can also arise if compliance checks need to be carried out, especially when a payment passes through different countries and jurisdictions.” Bitcoin needs no compliance checks. Nodes verify whether the transaction follows the rules of bitcoin, by ensuring the bitcoin is coming from a valid unspent transaction output, and that it is not being double-spent. There are no governments, authorities, people with guns, banks or central third parties that are required to complete the payment. Just miners, who are rewarded in bitcoin by expending energy and for including valid transactions in blocks.
There is nothing stopping me from sending bitcoin to anyone else anywhere in the world, regardless of their country, nationality, race, religion, age or whether or not they are on a sanctions list. Bitcoin knows nothing about its users and it knows no borders.
Bitcoin lives everywhere and nowhere; the ledger of all transactions is stored in a distributed manner on computers called nodes that are running the bitcoin software. If someone is trying to escape capital controls or oppression of any kind, they can leave the country with the clothes on their back and still access all of their bitcoin by remembering their seed phrase and recovering their funds when they get to a safe place.
Leaving one’s country due to capital controls, oppression or war is an extreme example and a majorly useful albeit drastic use-case, but even the ability to travel with a significant amount of funds is an impressive use-case. One anonymous Reddit user claims to have exited a country with $1 million of bitcoin by keeping their seed phrase with them on the flight.
Without getting further into the implications of being able to escape from a country with one’s entire net worth in their pocket (or mind), there are other major problems that bitcoin has solved, namely, the ability to pay someone quickly in another part of the world.
It is not yet possible to fully understand the impact of Bitcoin having solved cross-border payments.
You could buy some saffron from Afghanistan with a weeklong wire transfer or you could just order some from the merchant and pay them directly with bitcoin.
Need some design work done for your business? You can hire a graphic designer from halfway around the world and they can receive the money for their work in approximately 10 minutes.
I was able to send a tiny amount of bitcoin to a stranger in Africa and they got the money in their wallet almost instantly.
These types of peer-to-peer transactions are exactly what Bitcoin was designed to facilitate. The fact that anyone can opt into direct trade with anyone else, anywhere in the world is a major breakthrough that will have far-reaching ramifications that we are nowhere close to comprehending. As Lyn Alden stated in “A Look At The Lightning Network,”:
“Back when the iPhone was introduced in 2007, few people thought, ‘Wow this could really disrupt the taxi industry a decade from now.’”
Bitcoin’s ability for its users to send value easily, quickly and trustlessly while retaining property rights in the face of tyranny will have implications few people can grasp.
People will always find a way to protect their wealth. It is inevitable that people will come to the conclusion that bitcoin is the best option for them to do so.
This is a guest post by Craig Deutsch. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.