Does an industrial-sized dog whistle go off when advocates boast about cryptocurrency’s ability to evade US government sanctions?
Back in March, a founder of Tornado Cash — a so-called “mixer” service that masks cryptocurrency transactions by mixing them with others — told Bloomberg it would be “technically impossible” for sanctions to be enforced against decentralized protocols. Surprise: Tornado has now been sanctioned by the US Department of the Treasury’s Office of Foreign Assets Control, partly because of its use by hackers said to be linked to North Korean money laundering.
With Tornado down 95 percent from its all-time high and its source code removed from Microsoft Corp’s GitHub, it is the latest blow to the “no sanctions yay” theory of crypto — the three words used by former Ethereum Foundation scientist Virgil Griffith in 2019, when he told a blockchain conference in North Korea how to dodge sanctions by converting cash into crypto, costly advice that resulted in a guilty plea and a 63-month federal prison sentence.
In terms of technology, it shows that even the most decentralized service cannot avoid law enforcement. Exchanges are under pressure to monitor links to regular currencies, as are other service providers, and pseudonymous blockchains can be pored over for suspicious transactions — such as the gains of North Korean cybercriminals that transited through Tornado. As Bloomberg’s Emily Nicolle notes, the crypto industry has not been able to build all its infrastructure yet.
Geopolitically, crypto is also suffering — not surging — amid an economic cold war. After the COVID-19 pandemic and Russia’s invasion of Ukraine, Washington has been flexing its financial muscles, even amid angst about the kind of blowback that overreach or alternative currencies might bring. Keeping crypto in check fits with the history of US regulation of encrypted tech, like the e-mail mixers of the 1990s, but is also key for US soft power in wartime.
Ironically, even opponents of a dollar-based global economy have been ambivalent — at best — about crypto. For the likes of Russia and Iran, global pariahs that are also big energy exporters, crypto’s threats undermine its potential. While in theory they might be able to use crypto to facilitate trade and bypass US monitoring, that is outweighed by the prospect of capital flight, instability and price volatility. Moscow has veered between banning and encouraging digital assets, doubtless recognizing that they can help sanctioned elites on some level, but the ruble still carries muscle — as recent arm-wrestling with the EU over gas payments demonstrated.
While Tehran this week announced its first official import order using an unnamed cryptocurrency, according to Reuters, this is only one in a long line of cryptotests that have failed to gain traction. Regulation has also been erratic, as Iranian cryptominers have recently found.
Right now, therefore, it looks like even a world permeated by unprecedented sanctions, conflict and inflation will fail to give crypto a big boost. As economist Eswar Prasad recently wrote, US dollar hegemony could last a lot longer than expected.
However, there is one potential twist in the tale: central bank digital currencies, notably China’s e-yuan. These forms of digital money might play a big geopolitical role depending on how they are implemented and who gets there first.
A new book by sanctions experts Astrid Viaud and Paul-Arthur Luzu imagines a world in which China gains a first-mover advantage with a digital currency that is interoperable with others and imposes standards on other countries looking to avoid doing business in dollars.
One scenario wargamed by US officials, according to CoinDesk, is of a “fully portable” digital yuan that sees other countries using banks and payment providers as nodes effectively plugged into China’s infrastructure. That might see North Korea or Russia buy materials without reprisals. Iran is pursuing a digital central bank currency of its own.
This is only one future among many — it might be that US and eurozone digital currencies take off first, or that such projects end up fragmenting existing systems rather than strengthening them. Either way, it is all far-off.
However, it suggests that the payments cold war has a long way to go before threats to the dollar manifest themselves. It opens up a new zone of conflict that ensures “no sanctions yay” will remain little more than a slogan.
Lionel Laurent is a Bloomberg Opinion columnist covering digital currencies, the EU and France. Previously, he was a reporter for Reuters and Forbes.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners
When former president Tsai Ing-wen (蔡英文) first took office in 2016, she set ambitious goals for remaking the energy mix in Taiwan. At the core of this effort was a significant expansion of the percentage of renewable energy generated to keep pace with growing domestic and global demands to reduce emissions. This effort met with broad bipartisan support as all three major parties placed expanding renewable energy at the center of their energy platforms. However, over the past several years partisanship has become a major headwind in realizing a set of energy goals that all three parties profess to want. Tsai
An elderly mother and her daughter were found dead in Kaohsiung after having not been seen for several days, discovered only when a foul odor began to spread and drew neighbors’ attention. There have been many similar cases, but it is particularly troubling that some of the victims were excluded from the social welfare safety net because they did not meet eligibility criteria. According to media reports, the middle-aged daughter had sought help from the local borough warden. Although the warden did step in, many services were unavailable without out-of-pocket payments due to issues with eligibility, leaving the warden’s hands
Indian Ministry of External Affairs spokesman Randhir Jaiswal told a news conference on Jan. 9, in response to China’s latest round of live-fire exercises in the Taiwan Strait: “India has an abiding interest in peace and stability in the region, in view of our trade, economic, people-to-people and maritime interests. We urge all parties to exercise restraint, avoid unilateral actions and resolve issues peacefully without threat or use of force.” The statement set a firm tone at the beginning of the year for India-Taiwan relations, and reflects New Delhi’s recognition of shared interests and the strategic importance of regional stability. While India
There is a modern roadway stretching from central Hargeisa, the capital of Somaliland in the Horn of Africa, to the partially recognized state’s Egal International Airport. Emblazoned on a gold plaque marking the road’s inauguration in July last year, just below the flags of Somaliland and the Republic of China (ROC), is the road’s official name: “Taiwan Avenue.” The first phase of construction of the upgraded road, with new sidewalks and a modern drainage system to reduce flooding, was 70 percent funded by Taipei, which contributed US$1.85 million. That is a relatively modest sum for the effect on international perception, and
RSS