The United States is concerned about the use of cryptocurrencies to circumvent sanctions. Let’s take a look.
Concern mount
- Computerworld: Russia may be using cryptocurrencies to thwart sanctions
- New York Times: Russia may use cryptocurrencies to ease US sanctions
- Ethereum World News: EU, US Concerned Russia May Use Cryptography to Avoid Sanctions
Those articles are from February and early March.
On March 17, Bloomberg reported that crypto experts did not say evidence of major Russian sanctions.
Former Ethereum developer Virgil Griffith goes to 63-month prison
April 12, Yahoo! News reported that former Ethereum developer Virgil Griffith will be in jail for 63 months.
Former Ethereum developer Virgil Griffith was sentenced to US $ 100,000 in prison for violating international sanctions against North Korea for speaking at a cryptocurrency conference in the Kingdom of Hermit in April 2019. Was imposed.
At the meeting, Griffith explained the use of blockchain technology in money laundering to avoid sanctions.
His crime was instructing North Korea on how to use cryptocurrencies to circumvent sanctions if you call it it.
He insisted on avoiding up to 20 years’ imprisonment for violating the International Emergency Economic Powers Act, a law that is suspicious to say the least.
He now goes to jail to discuss what is already widely known in the underworld. I suspect he has presented something that is not yet widely known in Russia and North Korea.
Worried about Ethereum, not RMB
Eurointelligence commented that he was worried about Ethereum, not the yuan.
This is a story that initially seems to be outside our booking, but I think it has deep implications for the discussion inside. A young American programmer has been imprisoned in a New York court for 63 months. The reason is that he accepted the invitation to go to North Korea, where he gave a presentation to the Pyongyang blockchain and cryptocurrency conference.
The interesting thing about this story is the implicit perception that sanctions can be circumvented using the Ethereum blockchain. But trying to keep that information secret seems pretty pointless to us. Not everyone understands this, but all the information is public. Unlike North Koreans, Russians are proficient in technology. If North Koreans can avoid sanctions through the blockchain, so can Russians. If attempts to explain how it works are accompanied by long imprisonment, then one should probably assume that this is a real threat.
At this point, let’s cut into what looks like an irrelevant discussion. The impact of current Russian sanctions on the future role of the US dollar as the world’s leading currency. I’ve heard that many US commentators claim that it has no effect. We believe this is also the view of the US Treasury. This argument is formulated by Michael Pettis in the most compelling way. Michael Pettis cites three reasons: Other countries / regions of the world are willing to bear a large current account deficit to absorb the associated costs. Otherwise, the world economy will experience a very devastating restructuring shock.
Unlike North Koreans, Russians have shown in the past few weeks that they are already experts in avoiding sanctions. When economists speak of the dollar as a global currency, they remain within the framework they normally use, the monopoly fiat currency framework issued by central banks. There is no threat to the dollar from other currencies like the Chinese yuan. Pettis is a Chinese expert and knows that China is willing to run a large and sustainable current account deficit and liberalize the flow of capital to enhance the role of the renminbi.
Cryptocurrencies have one characteristic of gold. That is, supply growth is limited. However, unlike gold, it can be used directly in complex cross-border transactions. This is the first financial system in human history that is not supported or controlled by central authorities. The dollar will continue to be the largest currency in the world. No one will challenge the dollar with our analog Metaverse. However, it will become increasingly difficult for the United States to use the role of the dollar to force the world to comply with its will. Not all programmers can be imprisoned.
Pettis and siding
I’m still on Pettis’s side.
Nevertheless, the last paragraph of Eurointelligence is true: “No one will challenge the dollar with our analog Metaverse. However, it will become increasingly difficult for the United States to use the role of the dollar to force the world to comply with its will.Not all programmers can be imprisoned.. “
But Eurointelligence missed the boat in one paragraph I omitted. here it is.
The bigger threat comes from disruptive technologies like blockchain. This will allow people to engage in financial transactions without having to interface with the current global financial markets in which the United States has significant dominance. As long as you don’t try to convert Bitcoin or Ethereum to dollars and stay in a crypto-based economic system, there’s nothing the United States can do financially to stop you.
Q: What’s wrong with the paragraph?
A: There is nothing.
Sure, that’s what I’ve said repeatedly.As long as you don’t try to convert Bitcoin or Ethereum to dollars and stay in a crypto-based economic system, there’s nothing the US can do financially to stop you... “
Unique cryptographic weaknesses
bingo.
That sentence is a unique weakness of the crypto universe.
As long as you don’t try to convert the cipher to dollars or euros, that’s fine.
For now, there is a way around the detection. The same applies to SWIFT, a US-approved international payment notification system.
Russia can also circumvent SWIFT sanctions, perhaps through the linking of multiple accounts through China, India, or other countries that do not enforce US sanctions.
Understand sanctions avoidance
Avoidance holes are everywhere. Cryptography is just another hole.
Currently, the United States, EU, etc. are sanctioning individuals and countries. Avoidance is to avoid detection.
The way to close the hole is to completely block the movement of the dollar in and out of the crypto.
Sanctions on individuals or countries do not work. A complete block of cryptocurrency and monetary transactions from cryptography is a real threat.
High taxes can have a similar effect. Buying something with Bitcoin constitutes a Bitcoin sale. This is a taxable event.
Hunt Brother Silver Cornering
The collapse of Hunt Brother Silver Cornering also comes to mind. At some point, the Hunt Brothers dominated most of the silver in the world.
Federal Commodity Regulators then introduced special rules to prevent long-position contracts from being created or sold for silver futures. A pile of shorts. The price has plummeted.
There are many ways the government can shatter Bitcoin, but the easiest is to combine a total ban on selling Bitcoin in cash with merchant restrictions.
No one will confiscate Bitcoin and no one will stop mining. There is no way to buy anything cryptographically other than peer-to-peer barter.
No matter how many times this is repeated, the Bitcoin bull will reject it as impossible. It’s not impossible.
How likely is this scenario?
I do not know. Perhaps it is not “never”. But the threat is real. All you need to do is feel that the Fed or the US government is threatened with the use of cryptography. Possible reasons are fraud prevention and energy use.
If the transaction is banned, Bitcoin will crash immediately. On the other hand, the higher the price of Bitcoin, the more likely it is that crackdowns will occur.
Bitcoin crashes will mitigate the threat.
Now let’s get back to sanctions, avoiding sanctions, and weaponizing the US dollar.
Janet Yellen warns China about building a bipolar global financial system with Russia
Listen to Treasury Secretary Janet Yellen’s speech. She warned China about cooperation with Russia.
Many thought this was related to the US dollar as the world’s reserve currency.
It wasn’t. It was about avoiding sanctions.
For a discussion, see Janet Yellen warns China about Russia and builds a bipolar global financial system.
Treasury Secretary Janet Yellen is concerned that Russia will avoid sanctions through countries such as China and India. Many countries will establish ways to prevent the United States from deciding on sanctions policies for the world.
Ethereum and Bitcoin are two more ways. But is it “for now” or “forever”?
What will China do with the dollar, which is no longer risk-free? Would you like to buy gold?
To understand the difficulty of escaping the dollar, take a look at what China does with a dollar that is no longer risky. Would you like to buy gold?
To connect all this, see US Sanctions Policy Drives Russia to Default.Let’s investigate the impact
I would like to see a currency backed by 100% gold, but no country accepts the financial and trade discipline requirements required by commodity backing.
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