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I think what's usually being overlooked by 'people in the West' is how crypto-currencies are being used by individuals in emerging markets to evade domestic cur

I think what's usually being overlooked by 'people in the West' is how crypto-currencies are being used by individuals in emerging markets to evade domestic currency controls. I've recently had the chance to get a glimpse into the crypto volumes generated by that sort of activity, let's just say they're staggeringly high. Domestic currency controls seem to offer all sorts of arbitrage possibilities that can be exploited using crypto currencies, the cycle usually goes -> some weak currency -> somehow convert to crypto -> sell crypto for USD -> sell USD back for that same weak domestic currency with a markup. In addition, compared to those currencies, crypto currencies offer both stability and interchangeability into stronger store of values (be that other currencies or stocks or what not). In this system crypto exchanges have become global banks of sorts that allow their clients to manage their now globally available funds. Putting all other things and considerations etc. aside this is a pretty fascinating system fuelled by weak states and failing economies all around the world. I think as long as those states exist there will always be an incentive for such systems to exist.

ngc248 5y ago
people keep saying this in every thread. I don't understand how that works. Is it that people in the "weak" states are using BTC for commerce or are they exchanging BTC to USD and then using it. How does it work? I doubt there are exchanges which will do the BTC -> USD conversion. So what are these people using to do this? Coinbase?
- meheleventyone 5y ago
  Yes and it always curiously ignores that mobile banking is the actual technology that has actually massively helped the unbanked. I suspect if Bitcoin is helping people in these countries evade currency controls it’s helping the rich not the poor and rather enabling capital flight than adding stability.
  - eru 5y ago
    You are mostly right, but do keep in mind that enabling capital flight is a _good_ thing! Just like helping people to leave bad places is a good thing. The risk of capital flight puts a limit on how bad the local regime can screw up the economy and still squeeze money out of it. (And calling it capital flight is just a mean way of saying 'people want to invest elsewhere'.)
    - meheleventyone 5y ago
      Capital flight actively hurts the economy it is removed from and only benefits the rich (who are often the local regime and often literally robbing the country) at the expense of the poor people trapped there. Which is totally counter to the narrative most crypto people put forward that somehow it's helpful to the average person living in those countries. Basically the money and the wealthy can get out leaving the rest of the country floundering in an even worse situation. Which doesn't sound all that "good" to me.
      - eru 5y ago
        And that's why we should ban people living in eg the US from investing in any other country? And why we are at it, we should also ban people from drawing down their capital and consuming it. The effect is the same as capital flight, after all. No more drawing down your retirement savings! In any case, if you are powerful enough to rob a poor country, do you think you would be subject to any laws preventing capital flight?
        meheleventyone 5y ago
        Shifting the goal posts isn't the win you think it is. We're talking about a specific context.
        eru 5y ago
        See my update. Basically, anyone powerful enough to rob a country wouldn't really be subject to captial controls anyway. Unless of course you want to blame the kulaks, and not the people with connections to government of robbing the country.
  - TheColorYellow 5y ago
    Cryptocurrency as a means of payment is used in Africa. And the usage of Bitcoin as an inflation hedge has certainly been proven by the fact that Bitcoin returned superior returns over the inflation rise recently than any other asset an average African could have held. Maybe we shouldn't ignore that mobile banking in Africa still doesn't allow easy access to US dollars? Maybe we shouldn't ignore that a transfer from the currency in Ethipoia to the currency in Nigeria requires routing through the European banking system? Don't act as if the traditional financial system has greatly supported the emerging market world. Let's not lie to ourselves.
    - sdenton4 5y ago
      What proportion of bitcoin's five economically meaningful transactions per minute are African? This activity is a rounding error.
- akhodakivskiy 5y ago
  For example in Russia the chinese vendors would sell their stuff for cash rubles, convert them into crypto, send crypto to china, order a container of new stuff, ship it to Russia, repeat. basically they save on taxes, conversion fees, cross border transfer fees, etc. on the cash portion of their revenues. it’s probably harder to do the same with card payments as the tax agencies are in control of electronic payments. in the end there has to be a reason to use crypto in some economic activity. in the example above it’s cost management.
  - jfk13 5y ago
    > cost management You mean tax evasion? I suppose that's a good thing if you're basically in favour of anarchy and societal collapse. Personally, I'm not.
blitzar 5y ago
> Domestic currency controls seem to offer all sorts of arbitrage possibilities that can be exploited using crypto currencies, the cycle usually goes -> some weak currency -> somehow convert to crypto -> sell crypto for USD -> sell USD back for that same weak domestic currency with a markup. That isnt evading currency controls, that is arbitraging domestic currency controls. Evading currency controls looks like this: earn rubley-pesos, convert to crypto, convert to USD, stuff under matress. These so called weak states and failing economies all around the world have had secondary markets (mostly in USD - see the blue dollar in argentina as just one example) since before the birth of satoshi, let alone the birth of cryptocurrency. Its not some great new trick invented by bitcoin.
- disgruntledphd2 5y ago
  It probably makes it a lot easier for people with ridiculous amounts of money and strong capital controls to transfer assets abroad. Like, the Chinese government cracked down hard on Bitcoin, and while the energy stuff was definitely a factor, I'd be really surprised if cracking down on ways to to take money out of the Chinese economy wasn't also a factor.
- TheColorYellow 5y ago
  What actual digital currency markets have existed in Argentina or any other weak state prior to Bitcoin? All of these dark markets where cash only markets before, precisely because prior to Bitcoin you always needed a reliable state sponsored intermediary for online transactions. This is not a tick.
  - drekk 5y ago
    Crypto doesn’t offer anything new over the blue dollar market besides digitizing it at a huge energy markup. If you're converting your crypto back to fiat you're still needing a reliable state sponsored intermediary at some point in the pipeline. Most people don't really trade flash drives with coins anymore, they use Coinbase or something that has their government ID on file. And it's not like the conversion rate from Argentine pesos to Ethereum or whatever is very favorable — it's the same as the conversion to dollars. You can argue it's more stable than Argentine pesos but that's a really low bar to clear with 50% yearly inflation. Dollars also are more stable and don't require any technology or technical knowledge. What it has mainly enabled is for people in these "weaker states" to take advantage of public goods like electricity subsidies to "mine" (read: verifiably waste energy) whatever FotM crypto and dump it for the next cycle. I'm not sure why it's controversial to dislike rewarding people for wasting a very disproportionate amount of energy in a public way.
Ekaros 5y ago
This chain has big questions. Where does that conversion happen? Weak currency to crypto? Who sell crypto? For a weak currency? And then okay exchanging for USD is possible, paypal etc. etc. How do you get that USD to location you are, presumably under controls... And now sell it? It just seems extra steps.
- eru 5y ago
  Well, whatever you usually do to earn any other currency, you could presumably do to earn bitcoin directly? (Not in the real world at the moment, or at least not very much.)
  - Ekaros 5y ago
    That would mean the person paying you have to get the bitcoin from somewhere. Doesn't really change the underlining problems of conversion. Unless the one you work for is outside the system. Which in large scale is probably pretty unlikely. On ramp and off ramp isn't globally solved issue and many ways are easily attacked. Just ban fiat transfers to exchanges...
    - eru 5y ago
      > That would mean the person paying you have to get the bitcoin from somewhere. Doesn't really change the underlining problems of conversion. Unless the one you work for is outside the system. Which in large scale is probably pretty unlikely. You are right, but I don't see how (at least in principle) earning bitcoin this way is harder than earning USD this way? They both originate outside the system. In practice, USD are much easier to get your hands on at the moment, and they are harder to trace. Especially as cash.
devoutsalsa 5y ago
How do people in countries with currency controls actually buy crypto? Debit cards? A friend of mine in a developing country with currency controls was trying to buy crypto, and I recall her getting scammed by some dude who took her cash and never delivered the crypto.
- fragmede 5y ago
  That's how it works, your friend was just unlucky enough to get scammed. But even if she hadn't gotten scammed, how did the person she bought the crypto from get their crypto to begin with? At the in-country upstream end, is a crypto farm running mining hardware, lossly turning local currency with the power company into crypto coins (croins), which can then be traded for local or foreign currency.
evnix 5y ago
India is an emerging market, it has a better digital transaction system implemented(UPI) than most of the western counterparts with low to zero transaction fees. a vendor on the roadside without a roof over his head or access to a cellphone can sell services or do digital transactions. Visa and MasterCard duopoly is almost at the verge of being replaced and all this has nothing to do with Blockchain or crypto currencies.
ManuelKiessling 5y ago
Maybe that’s what we should actually be aiming for: fixing those societies/economies at least so much in the direction of the “good ones” (where you can trust banks to take care of your money, can trust market players, trust the courts etc.) that crypto becomes uninteresting. I mean, there was a functioning black market in post-WWII Germany – that doesn’t mean it was actually “good”. It was simply necessary until society got back in order.

ngc248 5y ago

people keep saying this in every thread. I don't understand how that works. Is it that people in the "weak" states are using BTC for commerce or are they exchanging BTC to USD and then using it. How does it work? I doubt there are exchanges which will do the BTC -> USD conversion. So what are these people using to do this? Coinbase?

meheleventyone 5y ago
Yes and it always curiously ignores that mobile banking is the actual technology that has actually massively helped the unbanked. I suspect if Bitcoin is helping people in these countries evade currency controls it’s helping the rich not the poor and rather enabling capital flight than adding stability.
- eru 5y ago
  You are mostly right, but do keep in mind that enabling capital flight is a _good_ thing! Just like helping people to leave bad places is a good thing. The risk of capital flight puts a limit on how bad the local regime can screw up the economy and still squeeze money out of it. (And calling it capital flight is just a mean way of saying 'people want to invest elsewhere'.)
  - meheleventyone 5y ago
    Capital flight actively hurts the economy it is removed from and only benefits the rich (who are often the local regime and often literally robbing the country) at the expense of the poor people trapped there. Which is totally counter to the narrative most crypto people put forward that somehow it's helpful to the average person living in those countries. Basically the money and the wealthy can get out leaving the rest of the country floundering in an even worse situation. Which doesn't sound all that "good" to me.
    - eru 5y ago
      And that's why we should ban people living in eg the US from investing in any other country? And why we are at it, we should also ban people from drawing down their capital and consuming it. The effect is the same as capital flight, after all. No more drawing down your retirement savings! In any case, if you are powerful enough to rob a poor country, do you think you would be subject to any laws preventing capital flight?
      - meheleventyone 5y ago
        Shifting the goal posts isn't the win you think it is. We're talking about a specific context.
        eru 5y ago
        See my update. Basically, anyone powerful enough to rob a country wouldn't really be subject to captial controls anyway. Unless of course you want to blame the kulaks, and not the people with connections to government of robbing the country.
- TheColorYellow 5y ago
  Cryptocurrency as a means of payment is used in Africa. And the usage of Bitcoin as an inflation hedge has certainly been proven by the fact that Bitcoin returned superior returns over the inflation rise recently than any other asset an average African could have held. Maybe we shouldn't ignore that mobile banking in Africa still doesn't allow easy access to US dollars? Maybe we shouldn't ignore that a transfer from the currency in Ethipoia to the currency in Nigeria requires routing through the European banking system? Don't act as if the traditional financial system has greatly supported the emerging market world. Let's not lie to ourselves.
  - sdenton4 5y ago
    What proportion of bitcoin's five economically meaningful transactions per minute are African? This activity is a rounding error.
akhodakivskiy 5y ago
For example in Russia the chinese vendors would sell their stuff for cash rubles, convert them into crypto, send crypto to china, order a container of new stuff, ship it to Russia, repeat. basically they save on taxes, conversion fees, cross border transfer fees, etc. on the cash portion of their revenues. it’s probably harder to do the same with card payments as the tax agencies are in control of electronic payments. in the end there has to be a reason to use crypto in some economic activity. in the example above it’s cost management.
- jfk13 5y ago
  > cost management You mean tax evasion? I suppose that's a good thing if you're basically in favour of anarchy and societal collapse. Personally, I'm not.

blitzar 5y ago

> Domestic currency controls seem to offer all sorts of arbitrage possibilities that can be exploited using crypto currencies, the cycle usually goes -> some weak currency -> somehow convert to crypto -> sell crypto for USD -> sell USD back for that same weak domestic currency with a markup. That isnt evading currency controls, that is arbitraging domestic currency controls. Evading currency controls looks like this: earn rubley-pesos, convert to crypto, convert to USD, stuff under matress. These so called weak states and failing economies all around the world have had secondary markets (mostly in USD - see the blue dollar in argentina as just one example) since before the birth of satoshi, let alone the birth of cryptocurrency. Its not some great new trick invented by bitcoin.

disgruntledphd2 5y ago
It probably makes it a lot easier for people with ridiculous amounts of money and strong capital controls to transfer assets abroad. Like, the Chinese government cracked down hard on Bitcoin, and while the energy stuff was definitely a factor, I'd be really surprised if cracking down on ways to to take money out of the Chinese economy wasn't also a factor.
TheColorYellow 5y ago
What actual digital currency markets have existed in Argentina or any other weak state prior to Bitcoin? All of these dark markets where cash only markets before, precisely because prior to Bitcoin you always needed a reliable state sponsored intermediary for online transactions. This is not a tick.
- drekk 5y ago
  Crypto doesn’t offer anything new over the blue dollar market besides digitizing it at a huge energy markup. If you're converting your crypto back to fiat you're still needing a reliable state sponsored intermediary at some point in the pipeline. Most people don't really trade flash drives with coins anymore, they use Coinbase or something that has their government ID on file. And it's not like the conversion rate from Argentine pesos to Ethereum or whatever is very favorable — it's the same as the conversion to dollars. You can argue it's more stable than Argentine pesos but that's a really low bar to clear with 50% yearly inflation. Dollars also are more stable and don't require any technology or technical knowledge. What it has mainly enabled is for people in these "weaker states" to take advantage of public goods like electricity subsidies to "mine" (read: verifiably waste energy) whatever FotM crypto and dump it for the next cycle. I'm not sure why it's controversial to dislike rewarding people for wasting a very disproportionate amount of energy in a public way.

Ekaros 5y ago

This chain has big questions. Where does that conversion happen? Weak currency to crypto? Who sell crypto? For a weak currency? And then okay exchanging for USD is possible, paypal etc. etc. How do you get that USD to location you are, presumably under controls... And now sell it? It just seems extra steps.

eru 5y ago
Well, whatever you usually do to earn any other currency, you could presumably do to earn bitcoin directly? (Not in the real world at the moment, or at least not very much.)
- Ekaros 5y ago
  That would mean the person paying you have to get the bitcoin from somewhere. Doesn't really change the underlining problems of conversion. Unless the one you work for is outside the system. Which in large scale is probably pretty unlikely. On ramp and off ramp isn't globally solved issue and many ways are easily attacked. Just ban fiat transfers to exchanges...
  - eru 5y ago
    > That would mean the person paying you have to get the bitcoin from somewhere. Doesn't really change the underlining problems of conversion. Unless the one you work for is outside the system. Which in large scale is probably pretty unlikely. You are right, but I don't see how (at least in principle) earning bitcoin this way is harder than earning USD this way? They both originate outside the system. In practice, USD are much easier to get your hands on at the moment, and they are harder to trace. Especially as cash.

devoutsalsa 5y ago

How do people in countries with currency controls actually buy crypto? Debit cards? A friend of mine in a developing country with currency controls was trying to buy crypto, and I recall her getting scammed by some dude who took her cash and never delivered the crypto.

fragmede 5y ago
That's how it works, your friend was just unlucky enough to get scammed. But even if she hadn't gotten scammed, how did the person she bought the crypto from get their crypto to begin with? At the in-country upstream end, is a crypto farm running mining hardware, lossly turning local currency with the power company into crypto coins (croins), which can then be traded for local or foreign currency.

evnix 5y ago

India is an emerging market, it has a better digital transaction system implemented(UPI) than most of the western counterparts with low to zero transaction fees. a vendor on the roadside without a roof over his head or access to a cellphone can sell services or do digital transactions. Visa and MasterCard duopoly is almost at the verge of being replaced and all this has nothing to do with Blockchain or crypto currencies.

ManuelKiessling 5y ago

Maybe that’s what we should actually be aiming for: fixing those societies/economies at least so much in the direction of the “good ones” (where you can trust banks to take care of your money, can trust market players, trust the courts etc.) that crypto becomes uninteresting. I mean, there was a functioning black market in post-WWII Germany – that doesn’t mean it was actually “good”. It was simply necessary until society got back in order.