With Capital Controls, Bitcoin Reigns Supreme Cryptocurrency

This is an opinion editorial by Craig Deutsch, organizer of Asheville Bitcoiners, designer of The Bitcoin Game and junior editor of Bitcoin Magazine.

You may have seen or heard of people in Lebanon robbing banks for their own money. They are not Butch Cassidy, but just trying to get their own money out of the bank.

Lebanon is facing an economic crisis and banks have reacted by excluding depositors from their own accounts. As a result, several banks have been blocked by their customers, who are only looking to withdraw their own money.

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At the end of June 2022, the G7 countries froze around $300 billion in Russian central bank funds, including $30 billion in assets of Russian oligarchs. Ethiopia’s central bank bans the use of foreign currency in local commerce and lowers the threshold for how long residents returning to the country can hold foreign currency. Taiwan is facing large capital outflows and is floating the idea of ​​exchange controls if the trend continues to deteriorate. Local banks in Mongolia are limiting the amount of dollars their customers can buy to $300 a day due to a 40% decline in their foreign exchange reserves. Russian citizens flock to banks to withdraw their funds and the waiting time is two to three days.

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Likewise, financial surveillance and censorship continue to progress. Even transferring money to the United States involves risk. PayPal has expanded its “Acceptable Use Policy” to threaten users with fines of $2,500 per violation. The company is no stranger to freezing customer funds. In January 2022, three users filed a federal lawsuit for wantonly blocking them. More recently, the payment company closed the accounts of the UK-based Free Speech Union. (PayPal Authors Note 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 controls and capital flight

People will always find ways to protect their heritage.

It is well known that some countries have more favorable customs regarding privacy and banking taxation. With the publication of the Panama Papers and the Pandora Papers, the finances of current and former world leaders and more than 100 other politicians have been made public, proving that the wealthy elite have ways of storing their money in offshore accounts and shell companies, while ordinary people no longer have access to their bank accounts.

The reality of capital controls is becoming increasingly apparent as global tensions escalate. When Russia first invaded Ukraine, there was a story about a wealthy politician’s wife who got caught fleeing the country with suitcases full of dollars and euros. I have already listed many examples of countries tightening the monetary ties of their citizens. It’s only a matter of time before people recognize that bitcoin is the solution to currency restrictions and outright control.

Bitcoin knows no borders

According to Western Union, it can take anywhere from 24 hours to five days to send money internationally. From the SWIFT website:

“There are a number of reasons why cross-border payments may be delayed or blocked. First, not all account balances can be updated outside the hours of operation of local settlement systems. Delays can also occur if compliance checks need to be carried out, particularly when a payment transits through different countries and jurisdictions.

Let’s unpack SWIFT’s statement and compare it to Bitcoin:

“First of all, not all account balances can be updated outside of local settlement system business hours.” Bitcoin operates 24 hours a day, 365 days a year. It worked almost continuously for over 5,000 days. It is possible and common for users to send money outside normal business hours, on weekends and on 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 transits through different countries and jurisdictions.” Bitcoin does not need any compliance checks. The nodes check whether the transaction follows the rules of bitcoin, ensuring that the bitcoin comes from a valid unspent transaction output and is not spent twice. There are no governments, authorities, people with guns, banks or central third parties who are required to make the payment. Just miners, who are rewarded in bitcoin by spending energy and including valid transactions in blocks.

Nothing stops me from sending bitcoins to anyone else anywhere in the world, regardless of their country, nationality, race, religion, age, or whether or not they are on a mailing list. penalties. Bitcoin knows nothing about its users and knows no borders.

Bitcoin lives everywhere and nowhere; the record of all transactions is stored in a distributed fashion on computers called nodes that run bitcoin software. If someone tries to escape capital control or oppression of any kind, they can leave the country with the clothes on their back and access all their bitcoins by remembering their seed phrase and collecting his funds when he arrives at a safe location.

Leaving one’s country due to capital controls, oppression, or war is an extreme example and a very useful albeit drastic use case, but even the ability to travel with a large sum of money is an extreme case. awesome use. An anonymous Reddit user claims to have left a country with $1 million worth of bitcoins by keeping his seed phrase with him during the flight.

Without going into the implications of being able to escape from a country with all your net worth in your pocket (or your mind), there are other major problems that bitcoin has solved, namely the ability to pay someone quickly in another part of the world.

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It is not yet possible to fully understand the impact of Bitcoin having resolved cross-border payments.

You can buy saffron from Afghanistan with a week-long bank transfer or you can simply order some from the merchant and pay for it directly with bitcoins.

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Need design work for your business? You can hire a graphic designer from the other side of the world and he can receive the money for his work in about 10 minutes.

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I was able to send a small amount of bitcoin to a stranger in Africa and they received the money in their wallet almost instantly.

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These types of peer-to-peer transactions are exactly what Bitcon was designed to facilitate. The fact that anyone can opt to trade directly with anyone else, anywhere in the world, is a major breakthrough that will have far-reaching ramifications that we are far from understanding. 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 in a decade.'”

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 can grasp.

People will always find a way to protect their heritage. It is inevitable that people will come to the conclusion that bitcoin is the best option for them.

This is a guest post by Craig Deutsch. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.

James V. Hayes