Plenty of crypto investors worry about what major western governments are going to do using their massive power. Crypto was created and adopted back in 2009 by people who were reacting to the 2007 financial crisis and believed that centralized institutions were to blame.
That puts them in strange company with the other group who most fears and resents the power of western financial institutions; tinpot tyrants running dictatorial regimes.
Vladimir Putin doesn’t like getting sanctioned because it messes with his personal fortune. Some American analysts believe that he has more money than Warren Buffett, Elon Musk, or Jeff Bezos secretly stashed away.
He’s not interested in blockchain to promote freedom. Instead, he thinks it might be a way for him to escape the reach of western financial retribution when he does things like invade and kill his neighbors.
There’s a hitch in this plan, though.
Dictators are going to throw their weight behind blockchain, but they’re not going to be able to control what happens after that.
Everybody Loses the Bank War
I’m not surprised to see that Putin is interested in blockchain. He’s going to be interested in anything that could reduce the influence of western governments. The thing is, Blockchain tech isn’t going to bypass American financial reach and just give that power to Putin.
If it can protect Putin from American reach, it can also protect the citizens of dictatorships like Russia from their oppressive governments.
Here’s how it’s going to work. Putin is going to bring up the idea of a global blockchain-based payments settlement system to replace the ones that the west has cut him off from. He’ll make the noise because he’s not good for much else at this point, but he might get the ball rolling.
Then, maybe Xi Jinping comes along. Unlike Putin, Xi has a real claim to be controlling a real global superpower with a powerful economy and lots of financial clout.
And Xi Jinping has his own plans to spit in the eye of western countries through all kinds of territorial disputes with neighbors, up to and including all of Taiwan. So, there’s a strong chance he’ll throw his country’s massive economy behind the project.
That massive economy, by the way, had an annual GDP of $17.73 trillion in 2021 according to the World Bank, adding up to almost 80% the size of America’s.
It also has the world’s largest population of more than 1.4 billion potential new users, more than four times as many people as America has.
The Plan and The Reality
So, this absolutely massive population is going to be aggressively onboarded by their government into the world of digital currency. It makes sense for a dictatorship. All the people’s money will be a part of some government server.
That tyrannical government will be able to record or even block everything that its people spend money on, allowing it to control their lives more easily.
These digital systems are also intended to replace the intermediary financial institutions of today, which tend to deal in dollars and be susceptible to western influence (like when Russia was kicked out of SWIFT for invading Ukraine).
The thing is, these dictatorships think they can have their cake and eat it too. At this very moment that China is trying to create a digital currency that it can control, they’ve also banned crypto for being too hard for them to control.
I don’t expect them to be able to maintain that line of separation with their “official” digital currency on one side and all other digital currency on the other.
I expect that the people of China, or at least a large number of them, once they are forcibly introduced to digital currency, will seek to branch out into independent crypto assets that will help, not harm them as they try to escape from total government control.
When that happens, not only will these people gain new and better ways to bypass government surveillance, but we will see profits as the assets in our own crypto portfolios gain new users.
That’s how the plan by tyrants like Putin and Xi to adopt digital assets is going to backfire, reducing their control instead of increasing it.
And, fundamentally, the forces at work are no different than those that give the crypto asset class, and specifically the coins that are actually good, its strength. If something is useful, people will seek it out. If something solves an existing problem, people will favor it over existing options.
That’s the same force that drives all technology adoption everywhere, and that will help crypto become a mature asset class.