9 ms·

A Putin Aide Is Eyeing Cryptocurrencies to Beat Sanctions, Report Says

96 points by aalleavitch 9y ago

hueving 9y ago
Well one of the selling points of bitcoin is lack of government intervention. Seems like a prime use case.
- stock_toaster 9y ago
  Hasn't the North Korea been doing this for a while now?
jaredhansen 9y ago
"The Treasury today announced new regulations on cryptocurrencies, citing a 2017 report showing that cryptocurrencies are often used by rogue regimes and terrorist states to evade sanctions..."
- afsina 9y ago
  "rogue regimes" "terrorist states" and "sanctions" sounds like government inventions and scare words to me.
  - sdwa 9y ago
    All three of those things sound pretty plausible to me. ISIS is known to use bitcoin, and I doubt they're the only one, and the single biggest use case for bitcoin up until this year was to buy illegal drugs. Using bitcoin for illegal and nefarious purposes would surely be one of the most obvious things to do.
    - AlexCoventry 9y ago
      What's its biggest use case now? Funding ERC20 ICOs?
      - tCfD 9y ago
        Appearing to is good enough. Just as it funds and underwrites altcoin hustles. Need to lure in $1MM of real money to your ICO? Pay an old school bitcoiner to move $10MM to an address you claim to control and call it organic market interest.
sova 9y ago
Misread that as "sancti-coins" ...
- nasredin 9y ago
  Nice. I think these are the "new" sanctions that concern Putin. Basically Congress told the IC to draw up a list of Russian oligarchs, so they may be targeted. Since a lot of these oligarchs have money in the West (houses in Italy and Miami) this "Putin aide" may be worried about his future. Don't forget Putin is getting another 6 (?) year term.
avmich 9y ago
An interesting comparison came to mind. Germany was prohibited from developing some weapons following defeat in World War I. However the list didn't include rockets, so a lot of efforts were spent to create V-2 and to manufacture them in numbers no other country matched during World War II. This lead to explosive development in rocketry after the war. Here the technology - cryptocurrency instead rocketry - can get an unusual boost from state-sponsored efforts. Disregarding what we're going to see unfolding - a man in a high castle or a space race - the technology may likely benefit.
- Frogolocalypse 9y ago
  > However the list didn't include rockets Or submarines. Which is probably an even closer parallel.
  - DoveBrown 9y ago
    The Treaty of Versailles specifically prohibited the German navy from having any submarines. They got around this by creating a company in the Netherlands through which the German high command ran their research and development. After 1933, it's a different story, but it doesn't really hold as an example of restrictions increasing technological innovation.
    - Frogolocalypse 9y ago
      Thanks for the clarification.
Frogolocalypse 9y ago
I'm surprised that it is taking as long as it is taking for this to occur. It's also one of the reasons why it is going to be virtually impossible to stop. Over the past year there has been a corporate hijack attempt of the bitcoin consensus rules. The thing that is painfully obvious is how totally disorganised and incompetent the attack was. Anyone who understands how the technology works has listened to armies of get-rich-quick junkies explaining how their new fandangled blockchainz are gonna takeova da cryptoz. In reality, bitcoin is now stronger than it was six months ago, as its nodes are even more decentralized, and it is apparent to anyone who cares to look, that the threat of a PoW change that started being bandied about in bitcoin, actually made the corporate types slam on the brakes before they got crushed. But when state actors get involved, that is going to be an entirely different story. I expect that at some point over the next couple of years, governments (like the US) will black-list bitcoin addresses, which undermines the ability to shift funds. They'll go to coinbase, or every other exchange in western nations, and tell them which addresses they want payments halted in. Which is why technologies such as lightning have been developed, to further decentralize value transfers in the system. It will even allow for the routing of payments through a multiple of different blockchains if a route can't be found between participants. When any state actor decides that they want to start utilizing this value transfer system for things like oil, it will be trivially easy to circumvent sanctions. The greater the value of the market capitalization, the easier it will be to do this. I make no comment on whether it is good or bad. In many diplomatic arguments, sanctions are indeed a perfectly reasonable and effective way of addressing issues. They worked perfectly well in Iraq until the US invaded them anyway. They worked extremely well in the former Yugoslavia, and have curbed many of the worst excesses of Iran. But that only works when you control the money supply. The US, unfortunately, has abused that privilege for completely unrelated reasons, and now there is a method of permanently removing that control. It is what it is. The fireworks haven't even started in this space yet.
- alanfalcon 9y ago
  How do you effectively blacklist an address when you can just generate a new one? Treat it like a one time pad; unless the government is sending out these black lists in real time (but even then...)
bufferoverflow 9y ago
Yeah, but it's not like the country runs on cryptocurrencies. Let's say you get a billion dollars worth of BTC, then what? You would want to convert to fiat, both foreign (for imports) and rubles (for local projects). They can definitely print more rubles, devaluing them, but no real way of getting dollars/euros.
- wutbrodo 9y ago
  "Laundering" their BTC seems like a pretty easy arbitrage opportunity: you can sell stuff to Russians for BTC and then convert your BTC to dollars, in both cases avoiding the conventional fund transfer systems that the US gov't exerts control over. I might be misunderstanding something about how this works though.
  - bufferoverflow 9y ago
    1) You didn't explain where the dollars come from, while the country is under sanctions. And my billion dollars example was just an example, Russia needs hundreds of billions. 2) What do you mean by "sell stuff to Russians for BTC"? Did you mean buy stuff with BTC? What stuff is that?
- tehlike 9y ago
  You can sell it to private investors at a discount in country.
  - bufferoverflow 9y ago
    We're talking about huge sums to run the country. Hundreds of billions of dollars every year. Even if you magically find some private investors with that kind of cash, they will quickly run out of cash. Then what? The problem is getting dollars/euros into the country. There's one solution I see: allow cryptocurrencies to be used as legal tender throughout the country, and for imports/exports too. But then you have zero control over money printing. It would be an interesting experiment, but I doubt Russian government will do it. Besides, they announce banning of cryptocurrencies like every other month.
deleted 9y ago
[deleted]
rmason 9y ago
What about North Korea and Iran? Or is that where the Russians got the idea ;<)?
m3kw9 9y ago
First they would have to buy enough crypto, which will drive up prices, and they’d had to wait for prices to go up to gain any benefits. 3rd, the US will probably start some heavy regulations on it as it could start to pose a national security issue
azangru 9y ago
Funny thing: only today I saw a link to an article (my apologies, it's from infowars, but it is quoting some other source - a report by a Danish bank: https://www.infowars.com/russia-china-will-engineer-bitcoin-apocalypse-saxo-bank-predicts https://www.infowars.com/russia-china-will-engineer-bitcoin-...) that argued that Russia will crack down on cryptocurrencies in 2018.
- aalleavitch 9y ago
  If an infowars article is quoting another source, why the hell are you not linking the other source instead of the infowars article? https://www.home.saxo/campaigns/outrageous-predictions-2018?int_cmpid=op18-button1/#/appShell https://www.home.saxo/campaigns/outrageous-predictions-2018?...
  - Larrikin 9y ago
    He was trying to legitimize info wars
tehlike 9y ago
If anything, I am sure kremlin would do this on cryptocurrencies that support privacy - otherwise no sane business would like to accept money from a "tainted" address.
omarforgotpwd 9y ago
As if they're not already heavily using cryptocurrencies to circumvent sanctions, as this isn't part of the recent major run up in the price. Tomorrow there will be a story about how North Korea and Iran and drug dealers are thinking about starting to use cryptocurrencies...

96 points by aalleavitch 9y ago

hueving 9y ago

Well one of the selling points of bitcoin is lack of government intervention. Seems like a prime use case.

stock_toaster 9y ago
Hasn't the North Korea been doing this for a while now?

jaredhansen 9y ago

"The Treasury today announced new regulations on cryptocurrencies, citing a 2017 report showing that cryptocurrencies are often used by rogue regimes and terrorist states to evade sanctions..."

afsina 9y ago
"rogue regimes" "terrorist states" and "sanctions" sounds like government inventions and scare words to me.
- sdwa 9y ago
  All three of those things sound pretty plausible to me. ISIS is known to use bitcoin, and I doubt they're the only one, and the single biggest use case for bitcoin up until this year was to buy illegal drugs. Using bitcoin for illegal and nefarious purposes would surely be one of the most obvious things to do.
  - AlexCoventry 9y ago
    What's its biggest use case now? Funding ERC20 ICOs?
    - tCfD 9y ago
      Appearing to is good enough. Just as it funds and underwrites altcoin hustles. Need to lure in $1MM of real money to your ICO? Pay an old school bitcoiner to move $10MM to an address you claim to control and call it organic market interest.

sova 9y ago

Misread that as "sancti-coins" ...

nasredin 9y ago
Nice. I think these are the "new" sanctions that concern Putin. Basically Congress told the IC to draw up a list of Russian oligarchs, so they may be targeted. Since a lot of these oligarchs have money in the West (houses in Italy and Miami) this "Putin aide" may be worried about his future. Don't forget Putin is getting another 6 (?) year term.

avmich 9y ago

An interesting comparison came to mind. Germany was prohibited from developing some weapons following defeat in World War I. However the list didn't include rockets, so a lot of efforts were spent to create V-2 and to manufacture them in numbers no other country matched during World War II. This lead to explosive development in rocketry after the war. Here the technology - cryptocurrency instead rocketry - can get an unusual boost from state-sponsored efforts. Disregarding what we're going to see unfolding - a man in a high castle or a space race - the technology may likely benefit.

Frogolocalypse 9y ago
> However the list didn't include rockets Or submarines. Which is probably an even closer parallel.
- DoveBrown 9y ago
  The Treaty of Versailles specifically prohibited the German navy from having any submarines. They got around this by creating a company in the Netherlands through which the German high command ran their research and development. After 1933, it's a different story, but it doesn't really hold as an example of restrictions increasing technological innovation.
  - Frogolocalypse 9y ago
    Thanks for the clarification.

Frogolocalypse 9y ago

I'm surprised that it is taking as long as it is taking for this to occur. It's also one of the reasons why it is going to be virtually impossible to stop. Over the past year there has been a corporate hijack attempt of the bitcoin consensus rules. The thing that is painfully obvious is how totally disorganised and incompetent the attack was. Anyone who understands how the technology works has listened to armies of get-rich-quick junkies explaining how their new fandangled blockchainz are gonna takeova da cryptoz. In reality, bitcoin is now stronger than it was six months ago, as its nodes are even more decentralized, and it is apparent to anyone who cares to look, that the threat of a PoW change that started being bandied about in bitcoin, actually made the corporate types slam on the brakes before they got crushed. But when state actors get involved, that is going to be an entirely different story. I expect that at some point over the next couple of years, governments (like the US) will black-list bitcoin addresses, which undermines the ability to shift funds. They'll go to coinbase, or every other exchange in western nations, and tell them which addresses they want payments halted in. Which is why technologies such as lightning have been developed, to further decentralize value transfers in the system. It will even allow for the routing of payments through a multiple of different blockchains if a route can't be found between participants. When any state actor decides that they want to start utilizing this value transfer system for things like oil, it will be trivially easy to circumvent sanctions. The greater the value of the market capitalization, the easier it will be to do this. I make no comment on whether it is good or bad. In many diplomatic arguments, sanctions are indeed a perfectly reasonable and effective way of addressing issues. They worked perfectly well in Iraq until the US invaded them anyway. They worked extremely well in the former Yugoslavia, and have curbed many of the worst excesses of Iran. But that only works when you control the money supply. The US, unfortunately, has abused that privilege for completely unrelated reasons, and now there is a method of permanently removing that control. It is what it is. The fireworks haven't even started in this space yet.

alanfalcon 9y ago
How do you effectively blacklist an address when you can just generate a new one? Treat it like a one time pad; unless the government is sending out these black lists in real time (but even then...)

bufferoverflow 9y ago

Yeah, but it's not like the country runs on cryptocurrencies. Let's say you get a billion dollars worth of BTC, then what? You would want to convert to fiat, both foreign (for imports) and rubles (for local projects). They can definitely print more rubles, devaluing them, but no real way of getting dollars/euros.

wutbrodo 9y ago
"Laundering" their BTC seems like a pretty easy arbitrage opportunity: you can sell stuff to Russians for BTC and then convert your BTC to dollars, in both cases avoiding the conventional fund transfer systems that the US gov't exerts control over. I might be misunderstanding something about how this works though.
- bufferoverflow 9y ago
  1) You didn't explain where the dollars come from, while the country is under sanctions. And my billion dollars example was just an example, Russia needs hundreds of billions. 2) What do you mean by "sell stuff to Russians for BTC"? Did you mean buy stuff with BTC? What stuff is that?
tehlike 9y ago
You can sell it to private investors at a discount in country.
- bufferoverflow 9y ago
  We're talking about huge sums to run the country. Hundreds of billions of dollars every year. Even if you magically find some private investors with that kind of cash, they will quickly run out of cash. Then what? The problem is getting dollars/euros into the country. There's one solution I see: allow cryptocurrencies to be used as legal tender throughout the country, and for imports/exports too. But then you have zero control over money printing. It would be an interesting experiment, but I doubt Russian government will do it. Besides, they announce banning of cryptocurrencies like every other month.

deleted 9y ago

[deleted]

rmason 9y ago

What about North Korea and Iran? Or is that where the Russians got the idea ;<)?

m3kw9 9y ago

First they would have to buy enough crypto, which will drive up prices, and they’d had to wait for prices to go up to gain any benefits. 3rd, the US will probably start some heavy regulations on it as it could start to pose a national security issue

azangru 9y ago

Funny thing: only today I saw a link to an article (my apologies, it's from infowars, but it is quoting some other source - a report by a Danish bank: https://www.infowars.com/russia-china-will-engineer-bitcoin-apocalypse-saxo-bank-predicts https://www.infowars.com/russia-china-will-engineer-bitcoin-...) that argued that Russia will crack down on cryptocurrencies in 2018.

aalleavitch 9y ago
If an infowars article is quoting another source, why the hell are you not linking the other source instead of the infowars article? https://www.home.saxo/campaigns/outrageous-predictions-2018?int_cmpid=op18-button1/#/appShell https://www.home.saxo/campaigns/outrageous-predictions-2018?...
- Larrikin 9y ago
  He was trying to legitimize info wars

tehlike 9y ago

If anything, I am sure kremlin would do this on cryptocurrencies that support privacy - otherwise no sane business would like to accept money from a "tainted" address.

omarforgotpwd 9y ago

As if they're not already heavily using cryptocurrencies to circumvent sanctions, as this isn't part of the recent major run up in the price. Tomorrow there will be a story about how North Korea and Iran and drug dealers are thinking about starting to use cryptocurrencies...