Will Bitcoin Be Politicized as Sanctions Hit Russia Hard?

Resist the Polarization of Bitcoin

The world by and large does not politicize the dollar. The dollar is used by Mexican drug cartels, as well as charities to save the rainforests. We all more or less agree that the dollar is simply a neutral tool used by non-neutral parties. The morality and political affiliation is applied to the user of the tool, not the tool itself.

So why then are we seeing bitcoin and its uses at the center of the debate, instead of its users?

Bitcoin Embodies Libertarian Values

There is an argument that bitcoin has properties that embody certain political values. As Kraken CEO Jesse Powell puts it, “Bitcoin is the embodiment of libertarian values”.

He is talking about Bitcoin’s respect for property rights, and the inability to seize or freeze bitcoin held in self-custody wallets. Yes, bitcoin arguably embodies this particular libertarian value quite purely. Some would say that because of this bitcoin leans to the right of the political spectrum.

Bitcoin Supports Radical Egalitarianism

At the exact same time, bitcoin embodies radical equality and egalitarianism.

Bitcoin has absolutely no capability of discriminating against any of its users. It provides exactly the same unbiased and indiscriminate service to all of its users. This property looks more like a socialist or communistic aspect of bitcoin. So while bitcoin inhabits libertarian values on the one hand, it inhabits left leaning values on the other.

Bitcoin Sits Right in the Middle

It is for these reasons that I believe bitcoin sits uncomfortably in the middle of the social spectrum. A careful and objective analysis of bitcoin will reveal that it inhabits a handful of both left leaning, and right leaning values. The reason why I say uncomfortable is because some people see centrism as biparticism. Sometimes being in the middle means that you’re a bystander on political issues. If you’re not outright with the (left or right) cause, you’re against it. If you’re not for it, you’re part of the problem.

In my opinion, the right place for money to be is in the dead centre of the political spectrum. I don’t want the money of my country to embody too many left, or right leaning issues. I want it to be as neutral a tool as possible.

Russian Use of Bitcoin Will Increase

Despite what I’ve laid out above, Western nations continue to politicize bitcoin, and the use of it. Bitcoin helps the Russian government, its oligarchs, and the people evade economic sanctions.

In the first week of March, bitcoin continued to hit new all time highs against the Russian Ruble. Unsurprisingly this is partially because of the rapidly declining value of the Ruble, and partially because of bitcoin’s value proposition. But I would argue that these economic sanctions will not have the effect desired by Western economic powers.

Ban Bitcoin and It Just Gets Stronger

When governments ban or regulate something, that thing doesn’t go away. It only temporarily makes it more difficult to access or use.

People still want to use that thing, and will find a way to use it. Take marijuana or alcohol prohibition for example. In both cases, the prohibition of these substances led to the growth of a massive underground economy. The thing that was banned ended up being traded at a premium in these “black markets” because to trade and use the thing was to take on the additional risk of being caught and punished.

Lastly, these black market economies once established are exceedingly difficult to dismantle as there is a massive profit incentive to innovate ways to become decentralized and remain operational.

Sanctioning Russia Will Have the Opposite Effect

I postulate that the economic sanctions imposed on Russia will appear to work in the short term, but fail dismally in the long term. The sanctions create a massive incentive for Russia to adopt other tools. I think these sanctions would have worked in a pre-bitcoin era. But we live in a reality with bitcoin, a global money that everyone has access to, and no one can stop.

It may take some time, but I think Russia is prepared to play the long game and build systems around censorship resistant economic technologies. Once they do, Western nations will no longer have the power to crash the Russian economy through the use of prohibitive sanctions.

Increased Demand for That Which Cannot be Seized

In the last two weeks, I’ve read a handful of stories of Russian oligarchs having their accounts frozen, assets seized, and yachts sunk. The problem is that this only prompts these people to find a solution to their problem. If they’re having a problem with their assets being sold, then why not acquire more assets that cannot be seized? Russian citizens are also experiencing similar issues with being rejected from using their European banks while the conflict is still underway.

In my view, this only prompts each group to find a solution to the problem of financial and economic censorship. This very clearly points them towards bitcoin.

Bitcoin Holders Beware

Unfortunately for bitcoin holders around the world, I believe this all means that bitcoin is the next thing to be negatively targeted by “the media”. Bitcoin will be blamed for extending a lifeline to Russia, its leaders, and its people. People using or holding bitcoin may be seen as “part of the problem”. The reality is that bitcoin doesn’t extend anything to anyone. Like gold, bitcoin simply “is”. Bitcoin doesn’t have the capability of understanding that there is a war going on. It is a public utility, usable and accessible by all. Like air, it is everywhere. I assert and maintain that bitcoin is just an unbiased, omnipresent tool.

In my view, any attempt to place blame on and ban bitcoin is completely missing the point. Like marijuana and alcohol, there is little to gain by trying to attack, censor, and destroy something that is everywhere. The question to be asking here is, what do we do given that bitcoin exists and is not going away? The economic sanctions on Russia are, and will only continue to make things worse. By stopping goods and money from crossing the Russian border, it prompts the organizations in the crosshairs of the sanctions to build alternative means of conducting business. I think this will only prolong the conflict and make it worse over time.

“When goods don’t cross borders, soldiers will”. – Claude Frédéric Bastiat