Whatever its strengths and weaknesses, crypto was founded for one central reason: to create a form of currency not controlled by world governments. Now, in the face of the Russia crisis, the crypto community has to meet its maker and decide if it’s going to break its own #1 rule…
The Six Geopolitical Risks That Will Shape Markets in 2022
Let’s take a trip back to the original founding of crypto for a second.
It was in the fallout of the financial crisis of 2008.
The open manipulation of housing prices by major Wall Street firms, the collapse of huge multinational banks, and the government’s decision to intervene and rescue those banks that were “too big to fail” left people with less trust in the global financial system than ever before.
Into that environment came the white paper which announced the creation of Bitcoin, a new form of digital currency that wasn’t centralized or controlled by any one person, group, or government.
If crypto had a “Book of Genesis,” that white paper would be it.
These are literally the first words anyone ever read about what would come to be known as Bitcoin:
“A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution. Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending. We propose a solution to the double-spending problem using a peer-to-peer network.”
That white paper spawned Bitcoin, the central cryptocurrency on which all future cryptos would be modeled. And to this day, that peer-to-peer, no-financial-institutions model is at the heart of everything the crypto community pursues.
But now they face a new crisis and a very interesting question.
In the wake of Russia’s invasion of Ukraine, global governments and financial institutions moved to cut Russia off from its assets.
Russian Oligarchs in the last week have had their assets frozen, their yachts seized, and in one case, even had to decide to sell their multi-billion dollar Premier League football team.
Though the attacks on Ukraine continue, it shows how powerfully and universally the financial institutions can move when given the proper incentive.
And, though most people agree that sanctions against Russia are justified, it shows exactly why crypto was founded in the first place – if centralized financial institutions can cut off an entire country from their resources, what’s stopping them from doing that to you as an individual?
In fact, we saw this as recently as a couple weeks ago, when Canada started freezing the assets of people involved in the trucker protests.
(Make sure to read tomorrow’s newsletter, because we’ll talk about the flip side of why these two moves have proved really positive for crypto as a whole).
Now, the crypto community faces a tough challenge.
While you can’t necessarily shut off crypto access in the same way as with a major bank, the folks that control major exchanges like Coinbase and FTX can certainly freeze Russian accounts if they so choose.
But doing so would be a total violation, in one sense, of everything crypto was founded on.
It’s a tough moral dilemma, and I’m not saying I have the “right” answer. But so far, most crypto folks have held the line.
What do you think they should do? I’d be interested to hear your thoughts.
Either way, it provokes some interesting thoughts about the purpose of crypto and the future of our financial systems.
Jeffry Turnmire and InvestPub do not provide investment advice. Trading involves a substantial risk of loss and is not suitable for all investors. Many traders fail and you should not trade with money you cannot afford to lose. If you need personal financial advice, consult a financial advisor.
Daily Profit Publishing and Jeffry Turnmire do not provide investment advice. Trading involves a substantial risk of loss and is not suitable for all investors. Many traders fail and you should not trade with money you cannot afford to lose. If you need personal financial advice, consult a financial advisor.
We are not licensed to provide you personalized investment advice. Nothing in these communications should be construed as personal investment or financial advice.
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