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Comment by emc3 | Hacker News Reader

Probably not unrelated: US report: Allies of El Salvador's president deemed corrupt (last month) https://apnews.com/article/latin-america-el-salvador-1d089ae...

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America extorts other nations by virtue of the $US being the world's dominant reserve currency. The federal reserve can print money unimpeded, with foreigners bearing the brunt of inflation. The math is simple.

Foreigners only bare the brunt of the inflation if they own USD denominated debt or other fixed income assets.

Americans suffer if the dollar inflates because imports get more expensive and rates demanded on USD debt purchased by foreigners will go up, making the loans more expensive in America.

>>>Foreigners only bare the brunt of the inflation if they own USD denominated debt or other fixed income assets

If the local latin currency floats freely, there is nothing stopping foreigners from buying currency ans buying up real estate.

The US exports inflation in droves.

Oh word?

What currency does El Salvador use now? My hint: it's not called the peso.

It wouldn't be surprising if the US government were to take actions against governments that were moving away from the dollar, whether as legal tender, as foreign reserves, or for other purposes like pricing oil, but it doesn't seem likely that the USG knew about this move a month in advance. Are you suggesting that the Salvadorean president is attempting to retaliate for the report by dedollarizing?

Nothing to do with retaliation. They just want to protect their assets from being seized by the US government.

Hmm, are you suggesting that the US could overthrow their government, either by invasion as in Panama or by funding a terrorist campaign as in Nicaragua, and that Bitcoin would be more secure than suitcases of dollar bills against such actions? Surely not that the US would dramatically devalue its own currency in order to drain El Salvador's reserves? Or are you thinking that dollar-denominated reserves held in overseas banks would be easier for the US to seize, and Bitcoin avoids the need to hold the reserves overseas?

It seems to me more likely that the figures in the article amply explain the move:

> roughly 70% of people do not have bank accounts or credit cards. Remittances, or the money sent home by migrants, account for more than 20% of El Salvador's gross domestic product. Incumbent services can charge 10% or more in fees for those international transfers, which can sometimes take days to arrive and that sometimes require a physical pick-up.

I mean, living in Latin America, I'm well aware that the US has a long history of invading and overthrowing Latin American governments, I'm just not sure how Bitcoin reserves would protect against that.

It's Sanctions. The USA can put sanctions on anyone as they've done with Russia, Iran, Venezuela. All banks that trade with the USA must comply, and those people/places are locked out of the global financial system.

There's no effort of an invasion or coup involved. It's easy for the USA to do this to pressure people they don't like and that's why so many of these countries are moving away from USD.

Oh, I see. So reserves held in overseas banks might suddenly become inaccessible, even if not actually seized, and Bitcoin (unlike, say, the euro or yen) offers a way to reduce this risk?

If the currency is in a bank that deals with the US it could be seized. Bitcoin doesn't allow this.

Kind of: Bitcoin doesn’t allow transactions without knowing the key but that isn’t true for exchanges and the public ledger makes it easy to block transactions using that address. If everyone subject to US jurisdiction or treaty agreements blocks transactions traceable back to tainted addresses, the value plummets.

In this situation you would use an exchange in a friendly country.

… which doesn’t do any business with any entity participating in that financial regulation system

… whose customers either don’t intend to ever do so or have lowered their price to reflect those restrictions

Again, note that I’m not saying it’s impossible to work around the edges of the system but it will have real costs which many people aren’t interested in dealing with or will want to be aggressively compensated for.

So far no such attack on Bitcoin's fungibility has materialized; it's plausible that the outcome would be that Bitcoin would become useless to everyone subject to US jurisdiction or treaty agreements. So it seems unlikely to happen without a major war, because that plausible outcome would result in enormous capital losses for many people who are influential in the US. Another plausible result is countries withdrawing from treaty agreements with the US, even if they don't care that much about Bitcoin as such.

You’re leaving out the possibility which matches what we’ve seen historically: the major players decide that the money from criminals and rogue states isn’t enough to give up on legitimate business and just block those specific transactions. Someone can have a ton of Bitcoin and simply choose not to accept transactions from the smaller set of addresses on a watchlist.

Oh, that's not a possibility. The part you don't understand is that in Bitcoin you can't tell which transactions are people giving money to themselves and which ones are actually giving money to other people. So if Coinbase wanted to block transactions from, say, medical marijuana dispensaries ("criminals") they couldn't just block transactions directly from the dispensaries' known addresses; they'd have to block transactions that drew coins indirectly from the dispensaries as well. That would mean that your transactions could get blocked by Coinbase even if you weren't a dispensary, but because you had sold services to a dispensary in the past, or to someone who had sold services to a dispensary.

To avoid this risk, you'd have to somehow get access to Coinbase's blacklist of dispensary addresses—maybe they'd publish it—and blacklist them yourself. Pretty quickly you'd find you couldn't accept coins from anyone who used a mixer or any offshore exchanges, because all of them would receive tainted dispensary coins sooner or later. You'd probably find that a lot of the Bitcoin you thought you already had was tainted, too, or would become tainted later as new addresses were added to the blacklist.

(Also, presumably any published address would become tainted pretty quickly; anyone could buy some tainted millibitcoins and send them to it, and people in the tainted economy would have an incentive to get as many Bitcoin owners as possible on their side of the fence. So everybody who accepts donations by publishing a Bitcoin address would get their donations tainted: camgirls, libgen, sci-hub mirrors, Electrum server operators.)

So basically this kind of attack on fungibility would destroy most of the value of Bitcoin for anyone who was participating in the attack. "Simply choose not to accept transactions from the smaller set of addresses" isn't a coherent alternative.

Not only do I understand it, that was my point which you missed: from the perspective of the people in the regulatory system, that’s a feature — putting Iran on the blacklist and go after everyone who works with them is a feature, not a bug, and Bitcoin makes that so much easier than the traditional banking system that it’ll have a stronger deterrent effect because it not makes it easier to block now but also provides full retroactive punishment for anyone identified later. Normally you’d only catch people with what they had recently done, not a full immutable ledger of every transaction they ever made.

I suspect this is also why there’s no concerted campaign against it: Bitcoin just hasn’t been a barrier to prosecution.

When receiving a payment over lightning, there's no way to tell which node or which channel the funds originated from.

Even if there was some blacklist that all exchanges abided by, you can still use something like Ren Project to put your Bitcoin on Ethereum as renBTC, exchange it to USDC (or any other cryptocurrency) using a decentralized exchange, and withdraw it.

This process is completely decentralized, and AFAIK you can't trace the move from BTC to renBTC.

Remember that these are all public records which the authorities can monitor. If a blacklisted address transfers to another exchange, it’s not like the subsequent activity disappears from view - it just means that they look at the transaction chain on Ethereum, and add another money laundering charge to the tally.

What? No. The US has no legal power to seize assets outside its jurisdiction.

You realize that a lot of countries actually don't use dollars and use their own currency right?

They need access to a USD settlement network for imports/exports.

How does BTC change that?

Very few people are willing to accept El Salvador Sovereign currency. Many people (and maybe countries) will accept BTC.

The national currency in El Salvador is the US Dollar. They retired out their own currency in the 2000s.

The article explains that El Salvador, like Ecuador, is fully dollarized at present. Here in Argentina only the real estate market is dollarized. However, not dollarizing your domestic economy doesn't mean you can hold your central bank's reserves in your own currency; not even the US can do that.

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