Russia, SWIFT, and the Urgent Need for Privacy Coins

It's difficult to predict the future. But everything we're seeing now points to the adoption of full financial control for the state through CBDC.

On Wednesday my latest Bitcoin article was published on Seeking Alpha. The focus of that article was on the importance of self-custody in the crypto space. I specifically mentioned how supporters of the Canadian trucker protest were being targeted by Canadian financial institutions at the behest of Canada’s WEF-plant clown prince. The overall point being this kind of financial system weaponization illustrates the dire need for decentralized peer to peer currencies.

I want to briefly touch on the comments section on Seeking Alpha. Oh the comments section. As I said last week, I very rarely read the comments in my Bitcoin articles on Seeking Alpha because it turns into a cesspool. I usually check out after about ten hot takes. Bitcoin is incredibly polarizing and the people espousing the most extreme positions on BTC are generally the least qualified to do so. This is not unique to Bitcoin, of course. But I keep seeing off-ramp FUD (fear, uncertainty, doubt) brought up by the Bitcoin haters.

First, on-ramp is a quicker way to say dollar to Bitcoin conversion mechanism; this is generally accomplished on an exchange like Coinbase. Off-ramp is the opposite; on-ramps would be Bitcoin back to dollars via an exchange. The FUD argument is that those targeted through monetary weaponization in the traditional system will always be at risk of not being able to convert from BTC back to USD after transacting outside of the standard rails. This argument completely misses the point of decentralized currencies.

The fact that non-miners require an on-ramp does not necessitate an off-ramp. For example, I have no intention of sending the Bitcoin that I self-store back to Coinbase to exchange for dollars. Not needing a third party is the entire point. The original intention of Bitcoin was to be the new system, not to just be a supplement to the corrupt old one. We wouldn’t need to convert out of BTC and into some local unit currency to buy gas or food. The original goal was that everyone would just use decentralized monies. This has admittedly not happened but that doesn’t mean it still can’t.

This all brings me to Ukraine. Yesterday, Ukraine tweeted donation addresses for Bitcoin, Ethereum, and USDT (ETH stablecoin). Like the Canadian truckers a little over a week ago, absolutely anyone anywhere in the world can donate to the Ukrainian people via decentralized cryptocurrency without permission from a bank or government overlord. This is a beautiful thing. While it may not be the case in this instance, I think its important to highlight why Bitcoin donation actually has risk if you’re donating to a cause that is anti-establishment.

The fact of the matter is block explorers make it so that truly private transactions on the Bitcoin network are very difficult, probably impossible. All you need is Ukraine’s receiving address and you can start digging. As of publishing, there have been over 4,500 transactions involving Ukraine’s donation address. The address has received just under $3.5 million in Bitcoin. A state actor with time and motivation can easily start compiling the sending addresses (donors) and follow the fund flow. They can figure out exactly which exchanges the BTC originated from in the donor addresses and the day/time the funds were originally sent. From there, you just need cooperation from the exchanges and you have donor identities.

Bitcoin is an amazing first try at decentralized money. I think it’s a wonderful innovation and I’m glad I have some. But if we’re being intellectually honest and desire a truly decentralized peer to peer medium of exchange, we have to acknowledge Bitcoin’s flaws. The privacy flaw in Bitcoin is difficult for me to overlook given that I view it as a critical flaw that has largely been addressed by privacy coins like Zcash (ZEC) and Monero (XMR), among others. Look, I realize we may be beyond the point of annoyance as I continue to harp on privacy coins, specifically Zcash. But if you believe, as I do, that there is a need for decentralized currencies that can’t be weaponized, then there’s also a need for truly private transactions.

This is important to understand; donating Bitcoin isn’t a problem. Bitcoin can’t be weaponized by a dictator the way a fiat currency can be. But donating Bitcoin opens you up to fiat weaponization due to the public nature of its ledger if you still use traditional finance rails for your mortgage and your day to day expenses (like everyone). We can avoid this issue with ZEC. BTC is great as a fiat escape valve. ZEC might be better.

Now pretend we’re not talking about donating currency to Ukraine. Pretend you’re a Russian citizen who is against the invasion of Ukraine. You’ve seen the Ruble, your native currency, get absolutely shellacked in the last few days and now it looks like your country is indeed getting kicked out of SWIFT after all. Which destroys your ability to transact across borders. What do you wish you did with your wealth last week? Here’s a hint, Bitcoin is down 9% over the last two weeks measured in dollars but it’s actually up measured in Rubles.

If we learned anything over the last two years it should have probably been that nothing is what it seems in the moment. Two weeks to flatten the curve eventually turned into vaccine passports to keep jobs and frozen bank accounts as punishment for supporting the wrong causes. Now, Russia is to be kicked out of SWIFT.

The federal jab mandate was announced in mid-September 2021. At least 5 full weeks after the CDC was already acknowledging that the shots didn’t stop transmission. Even at the time, mandates were scientifically dubious, at best. So why’d the government try it? To push the limits. To test what we’ll put up with. And a lot of this testing has had undertones of financial dependence on the state. While the medical tyranny has clearly failed in most of America, we’re now seeing different strategies globally that all ultimately point to global financial disruption.

At this point, I’m starting to believe the war on freedom over the last two years has been misunderstood. It has looked like a war on speech or a war on bodily autonomy at various moments. Stripped down though, everything has actually been a war on the freedom to exchange. It all comes back to the money, right? This nightmare is moving in a direction that, believe it or not, is very similar to how it started; forced closure of businesses (inability to generate money) was replaced with jab or no job (inability to generate income). That has now been replaced with frozen bank accounts and the elimination of financial services (inability to access capital at all) even for those who have been jab compliant.

As I wrote in Crazy Like a Fox, kicking Russia out of SWIFT is not a small deal. This is going to lead to serious energy sourcing problems in Europe. It pushes one of the top oil producers on the planet out of dollars. If Russia can prove it doesn’t need to be in SWIFT to be economically viable to the rest of the world, other countries that are potentially more aligned with Russia than the US (like China) could eventually leave the system willingly to eliminate exposure to SWIFT weaponization potential going forward.

All of this is incredibly detrimental to the dollar’s standing as world reserve currency. A lot of dollars overseas could soon find their way back home. And while I do love this home, more dollars chasing finite goods in a country that doesn’t produce what it consumes seems like a really good way to destroy a currency and start something different. Something like a CBDC, perhaps?