Ask HN: Is the war in Ukraine the end of freedom for cryptocurrencies? | Hacker News Reader

Ask HN: Is the war in Ukraine the end of freedom for cryptocurrencies?

6 pointslkrubner11 comments

The Western democracies seem fairly serious about imposing serious economic sanctions on Russia. The Russian government is responding with the equivalent of capital controls, to prop up its currency and limit the possibility of panic and bank runs. It seems likely that Russians will, for awhile, try to circumvent some of those sanctions by using cryptocurrencies. For instance, a Russian citizen, if they think the ruble will lose more value than it already has, might try to trade rubles for a cryptocurrency, right now. How would the Western democracies respond to that? Will we see greater efforts to regulate cryptocurrencies?

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> How would the Western democracies respond to that? Will we see greater efforts to regulate cryptocurrencies?

Yes, especially outside of the west first. By transitioning to CBDCs just like how China has done. There are CBDC trials that use the cryptocurrency technology, even in Ukraine by Stellar Network [0] and Bhutan for XRPL [1] to power it.

Probably Russia will introduce their own digital currency that they can control.

[0] https://www.coindesk.com/policy/2021/12/14/ukraine-commercia...

[1] https://ripple.com/insights/bhutan-advances-financial-inclus...

I believe the opposite, I think this war will be a boon for cryptocurrencies, although I admit there will be a period of pain and learning before that.

To understand why, we need to make a key distinction between two aspects of the crypto world: (a) cryptocurrencies themselves, (b) on/off-ramps and centralized services that make cryptocurrency easier to access.

(a) Cryptocurrencies themselves

These are very difficult to regulate and shut down. As a government, you can try, but the decentralized nature means that as long as there are _some_ people that want to keep the decentralized network going, it is likely to live on. Hiding a private key is very easy (you could even hide it in your mind!). It's also extremely difficult to prevent peer-to-peer trading. If I want to trade X ethereum for a car, how can you stop me? Preventing that trade is equivalent to shutting down the internet and/or preventing all current cash trades.

(b) Centralized services and on/off ramps

These are very easy to regulate and shut down! This is why there will be short term pain. The best tool governments have right now is to prevent people from ever entering the crypto ecosystem in the first place. If I was a Russian citizen wanting to protect my savings, I would try to move everything into USDC or even BTC/ETH as quickly as possible. If you use a centralized on-ramp and fail to take privacy steps (e.g. for Eth, using a mixer such as Tornado), then this is very traceable. Your best bet is to perform a peer-to-peer trade, but unfortunately if you're holding Rubles right now, very few people would want to be on the other side of that trade.

Once the sanctions begin to bite and the rest of the world assesses the impact, I believe more people will begin to hold cryptocurrencies. Again, the best tool governments have is preventing you from ever entering the crypto ecosystem. Once you are in, and take the necessary steps to preserve privacy, there is little they can do to prevent you from performing peer-to-peer transactions. Sure, the current crypto ecosystem sucks for small transactions. You would not want to buy a loaf of bread with BTC/ETH any time soon (even on the lightning network or ETH L2s, they're not ready yet). However, if you're living in a highly sanctioned state with a crumbling currency and you need to make a life-defining transaction (e.g. buy a car to drive across the border) then what is your best bet? It's cryptocurrency.

The main problem your hypothetical person might have is that you have to find someone willing to take your Rubles in exchange for Bitcoin. Who wants more of a currency that is rapidly collapsing and that you can't spend? It might be an interesting time to speculate in the Ruble - if it bounces back, you would almost double your money.

Democracies hopefully won't be able to do a thing about it (although there's a lot of debate to be had there), but crypto exchanges could easily unite and decide to make their own sanctions, effectively stopping to accept rubles/russian traffic. There would always would be work arounds, but that alone would go a long way.

Kind of the opposite, it shows that having a non-private non-government money network can be useful sometimes.

especially if your a dictator trying to access laundered money.

Perhaps this is just all just a coincidence?

https://www.step.org/industry-news/fca-extends-uk-crypto-ass...

Or perhaps not, who knows?

To me that's the problem with anonymous transactions. You don't know who your dealing with. Tax Evaders, Money launderers, Terrorists, dictators, sex traffickers, or freedom fighters(which most of the aforementioned probably consider themselves).

I wonder when those exchanges accepting Russian money will get "hacked". That'll be the biggest robbery of all times.

If people decided to dump rubles to bitcoin in a meaningful way then it would make a bad problem for the Russian economy worse.

Cryptos are transparent; gold is not. I think swiss trusts and fine art are going to be targeted more

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