A First Crypto War may lead to lasting peace

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The first crypto war was the Russia-invasion of Ukraine. The actual fighting is the most important part of the digital asset front.

Crypto has been a major focus throughout events, including the Ukraine government’s requests for bitcoin and ether, the Ukraine DAO, both sides’ use of stablecoins as financial refuge?, and European and U.S. bureaucrats’ angst over the use of cryptocurrency to bypass sanctions.

However the conflict ends, crypto will play a central role in world affairs. Moreover, the individual autonomy it brings could mean a more peaceful world, provided governments global standard-setting bodies don’t kill this promise through overreaching regulation or forced public alternatives.

Crypto could give citizens of aggressor countries an informal “citizens veto’ on war. If people flock to stablecoins amid host-country aggression or international sanctions, their actions could crush a nation’s ability to wage war. Russians are now allowing this veto. ditch the ruble for stablecoins, and it may thwart Russia’s ability to finance hostile operations.

Preventing conflict

Russia’s invasion could signify a return to the limited conflicts of pre-World War I (WWII), the gold standard era. Columbia Professor Saifedean Ammous explains this in The Bitcoin Standard before WWI, also known as the Great War, gold standard countries had limited options due to popular sentiment and their own treasuries.

After national reserves fell, governments were forced to increase taxes or issue bonds to keep fighting. As the conflict spread from initial locales, fiscal discipline failed in WWI. As Ammous explains, within the first month “all major belligerents had suspended gold convertibility, effectively going off the gold standard and putting their population on a fiat standard.”

By leaving the gold standard, countries printed money until, through inflation, the whole population’s wealth was squandered before winning or capitulating. This led to devastating consequences. A “citizen’s veto” via people ditching a nation’s fiat currency would lessen or preempt conflicts altogether.

This peaceful future could be thwarted by governments in two ways. The first option is forcing all crypto into a global Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) regime. The second option, which is even worse, requires everyone to use multi-jurisdictional digital currencies from central banks.m-CBDCs) with alternatives banned.

The AML/CFT system is the primary concern of global and national financial regulators is no understatement. According to the UN, terrorists and criminals can launder as much as $2.5 trillion. $2 trillion each year.

As CoinDesk columnist Nic Carter writes, stablecoins operate at least partially outside AML/CFT confines: “Stablecoin issuers treat the IOUs as bearer instruments, and generally do not seek to police user behavior when a transaction does not involve the issuer. . . . By granting a measure of transactional privacy and not embedding political conditions into transactions, stablecoins are the closest thing to digital cash we have today.”

This might appeal to criminals, as some may initially believe. But it would be strange to think ne’er-do-wells would rely on traceable, public ledgers common to most cryptocurrencies as transaction facilitators.

The risks of permanent and public recordation far outweigh the benefit of removing cash’s physical limitations. Some people have found this out the hard way, as did the New York City couple. allegedly sitting on billions but unable to spend them. Even the famous 2016 DAO hacker who almost brought down Ethereum and forced a hard fork has allegedly been unmasked.

Privacy and the tradeoff

While criminals may find ways to temporarily shield transactions, they will also create new ones. But the public, through democratic means – not unelected central bankers and global financial bureaucrats – should decide how much of this monitoring they will tolerate in return for their privacy.

As the Canadian Freedom Trucker Convey demonstrated, terrorists can be expanded with political expediency. (The Canadian government now admits the protests did not include terrorists or money launderers. These actions are unacceptable in a Western democracy.

A m-CBDC is even worse. For example, the coming Chinese model forces every citizen to use the digital yuan, and every transaction is monitored, recorded and factored into people’s social-credit score. Western governments, which are more sensitive to public perceptions, would likely filter these scores through the softening veneer of Environmental, Social, Governance metrics.

They could also refuse to do business with companies they consider insufficiently supportive of the environment or lacking diversity on their boards. This scenario may sound absurd, but terrorist designations for blue collar protestors would have been similar 12 months ago.

Neither of these models – granular AML/CFT or m-CBDC – allow for citizen vetoes in times of peace or war. As commentator Vivek Ramaswamy suggests, we may already be fighting a different war – the battle between the Great Reset imposed top down and the Great Uprising from the bottom up.

If so, crypto, with its promise of individual autonomy, control over one’s data and financial transactions, and potential to bypass entrenched institutions will be the main battlefield. The first crypto war could bring about a more peaceful world if the former wins.

 

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