With capital controls, Bitcoin is Supreme – Bitcoin Magazine
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 of people in Lebanon robbing banks for their own money. They are no Butch Cassidy, just trying to get their own money out of the bank.
Lebanon is facing an economic crisis and the banks responded by locking depositors out of their own accounts. As a result, several banks have been held back by their customers, who only want to withdraw their own money.
In late June 2022, the G7 countries famously froze around $300 billion of Russian central bank funds, including $30 billion of Russian oligarchs’ assets. Ethiopia’s central bank bans the use of foreign currency in local trade and lowers the threshold for how long citizens returning to the country can hold foreign currency. Taiwan is facing significant capital outflows and is pushing the idea of currency controls if the trend continues to worsen. Mongolia’s local banks limit the amount of dollars their customers can buy to $300 per day because their foreign exchange reserves are down 40%. Russian citizens flock to the banks to withdraw their money, and the waiting time is two to three days.
Likewise, economic surveillance and censorship continue to evolve. Even transferring money within the US 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 alleging they were locked out of their accounts without reason. More recently, the payment company closed accounts of the UK-based Free Speech Union. (Author’s note PayPal quickly reverse course when it became clear that many users were closing their accounts in response to this new policy.)
I think you can see the trend.
Capital control 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 practices when it comes to banking. With the release of the Panama Papers and Pandora Papers, the 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 of storing their money in offshore accounts and shell companies, while ordinary people are banned from their bank accounts.
The reality of capital controls is becoming more and more apparent as global tensions rise. When Russia first invaded Ukraine, there was a story about the wife of a wealthy politician who was caught fleeing the country with suitcases full of dollars and euros. I have already listed many examples of countries that are tightening their citizens’ monetary belts. It is only a matter of time before people realize that bitcoin is the solution to money restrictions and direct control.
Bitcoin Knows No Borders
According to Western Union, it can take anywhere from 24 hours to five days to send money internationally. From SWIFT’s website:
“There are a number of reasons why cross-border payments can be delayed or postponed. Firstly, not all account balances can be updated outside the opening hours of local settlement systems. Delays can also occur if compliance checks need to be carried out, particularly 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 business hours of local settlement systems.” Bitcoin runs 24/7, 365 days a year. It has been running almost non-stop for over 5,000 days. It is possible and common for users to send money outside normal working hours, on weekends and public holidays. Bitcoin settles transactions with finality in blocks almost every 10 minutes.
“Delays can also occur if compliance checks need to be carried out, particularly 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 that the bitcoin comes from a valid unused transaction output, and that it is not double-spent. There are no authorities, authorities, persons with weapons, banks or central third parties required to complete the payment. Only miners, who are rewarded in bitcoin for using 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 they are on a sanctions list or not. 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 run the bitcoin software. If someone is trying to escape capital controls or repression of any kind, they can leave the country with the clothes on their back and still access all their bitcoins by remembering their seed and get their money back when they get to a safe place.
Leaving one’s country due to capital controls, oppression, or war is an extreme example and a very useful if drastic use case, but even the ability to travel with a significant amount of funds is an impressive use case. An anonymous Reddit user claims to have left a country with $1 million in bitcoin by carrying the seed phrase on his flight.
Without getting into the implications of being able to flee a country with your entire net worth in your pocket (or mind), the other major problem that bitcoin has solved is the ability to pay someone quickly in another part of the world.
It is not yet possible to understand the impact of Bitcoin solving cross-border payments.
You can buy saffron from Afghanistan with a week-long bank transfer, or you can just order something from the seller and pay them directly with bitcoin.
Do you need design work for your company? You can hire a graphic designer from halfway around the world and they can receive the money for their work in about 10 minutes.
I was able to send a small 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 choose to trade directly with anyone else, anywhere in the world, is a major breakthrough that will have far-reaching consequences that we don’t even come close to understanding. As Lyn Alden stated in “A Look At The Lightning Network,”:
“When the iPhone was introduced in 2007, few 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 that few people can understand.
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.
