US adversaries are increasingly turning to the industry for economic boosts and to circumvent sanctions.
The US president, Donald J Trump doesn’t like Bitcoin. He has said as much, tweeting in July of last year that he was “not a fan”. Clearly, it would seem that on Donald Trump’s long list of dislikes, well behind Nancy Pelosi and CNN sits digital currencies.
However, Bitcoin and the industry behind it may be a far greater risk to Trump than Pelosi and the liberal media. This is because many of Trump’s international enemies are increasingly turning to Bitcoin to fight back.
The US president has been on an active campaign against Iran since he entered the Oval Office. Trump started by ripping up the nuclear deal, the basis for the recent peace and de-escalation in tensions. The most telling act was the assassination of General Qasem Soleimani in January, which prompted millions to attend his funeral and a retaliatory attack on a US base in Iraq.
Trump has also overseen a massive ramping up of sanctions against the Iranian state. Iran has been targeted like no other nation with North Korea, Cuba and Venezuala’s total sanctions combined not even matching those against Iran. These measures have crippled the Iranian economy since reinstation in 2017, with growth rates falling, oil prices rising and living standards increasing.
Government officials have been scrambling to find an answer to their economic problems. The government has turned to the cryptocurrency mining industry to invigorate the economy. Iran has always been an alluring location for miners due to the low electricity prices (3 times lower than western nations) and now they hope to capitalize on this by making mining a key driver of the economy. After giving large tax breaks to miners last year, in January, the Iranian government granted 1,000 new cryptocurrency mining permits. The Iranian Information and Communications Technology Guild hoped the permits would create $8.5bn in revenue.
This economic boost from mining is not enough for Iran though. The Iranian state is living under a system that places an importance on the US dollar, with financial institutions enforcing this unipolar structure. Yet, the Iranian government believes that a national cryptocurrency can be a way to circumvent the US dominance.
They have had plans to launch a cryptocurrency for quite some time, with initial planning saying it will be backed by the Iranian Rial or Gold. With a public warming to cryptocurrencies through the local ‘safaris’ (Bitcoin p2p traders) and other outlets, it is not hard to see this idea taking off.
The technology behind cryptocurrencies, blockchain, is also touted as a potential tool to combat sanctions. Russian and Iranian blockchain thinkers signed an agreement in November 2018 to help boost the technology in Iran, with one of the aims being to help the fight against sanctions. Alongside Iran in their fight against US sanctions and Trump’s ire is North Korea, who has also taken to the crypto industry as means of defiance.
North Korea has long been under the watchful eye of the United States and despite some cordial meetings with Supreme leader Kim Jong-Un, Trump is still never far away from losing his temper with the communist state.
Much like Iran with their mining push, the leaders of North Korea are also boosting the economy through crypto, although with less traditional or ethical methods. The nation has long seen the market as a great place to gain economic revenue from hacks and scams.
The UN has released numerous reports suggesting that North Korea has a specialized team of hackers who attack various exchanges, funding their economy a whopping total of $2 billion dollars in the process. The figure above was included in an expert panel report from last year, showing the full effect of the nation’s hackers on the industry.
Sanctions are a big issue for the North Korean economy, and much like Iran, they believe a national cryptocurrency can help bypass them. The country’s leaders have long been flirting with the idea. This was seen no more clearly than with a “secretive” cryptocurrency conference set for the 22-29th of February. This news certainly worried US officials, with stern warnings saying that those who attended would be breaking the law as the smaller provisions of the sanctions mention cryptocurrencies. The seriousness of this threat is shown by the arrest of US citizen, Virgil Griffith, 36 who gave a talk to North Korean officials in April, according to the FBI it was about how to avoid sanctions using cryptocurrencies and blockchain.
With both Iran and North Korea’s national cryptocurrency plans, an international coalition of nations will be needed in order for it to work. The countries will need partners to trade their cryptocurrencies with and to legitimize them to the UN and other international bodies. So, what are the possibilities of this happening?
Will we see a “cryptocurrency bloc” form?
The outlook is fairly positive. Iran’s international Trade Promotion Organization has held meetings with eight countries representatives about the potential of using cryptocurrencies for transactions. The countries in attendance included Switzerland, South Africa, France, England, Russia, Austria, Germany, and Bosnia-Herzegovina.
It’s further bad news for the US as many other slighted nations are also festering national cryptocurrency plans. China, a nation locked in a tumultuous trade war with the US is set to launch its own cryptocurrency sometime this year. Russia is also working on a similar project too, due in part to its sanction alleviating potential. Both major economies and nations are somewhat allies with Iran, and this trio could form the basis for a “cryptocurrency bloc”.
Venezuela, who already has its own US problem and national cryptocurrency (Petro) would certainly like to join this potential coalition of nations. Other sanction hit states like Cuba are also reportedly flirting with the idea of cryptocurrencies. Palestine, a nation that has long been under US-backed oppression from Israel as well as financial discrimination, has cryptocurrency ambitions. If there was the chance of an international market away from the constraints of the dominant US, that would certainly accelerate all of their plans.
Overall, the tide does seem to be shifting towards a digital worldwide economy and it appears to be US adversaries leading the charge, as the “leaders of the free world” and western Europe flounder in red tape and caution over a national digital currency. So, how will the US respond to this potential cryptocurrency threat?
How will the US respond?
Currently, the US has looked to contain the threat as much as possible. According to Foreign Policy, the U.S. Treasury Department’s Office of Foreign Assets Control added two Iranian individuals and their bitcoin addresses to its Specially Designated Nationals List in 2018. The US illustrated its worry with regards to North Korea’s cryptocurrency plans when arresting its citizens for attending.
However, this Bitcoin problem may not be very high on Trump’s agenda or even a thought at all. His stubbornness and headstrong nature mean Trump will definitely underestimate the power of cryptocurrencies, especially as he has so vocally dismissed them before. Trump and other politicians may scoff at the idea of cryptocurrencies entering world politics in a serious way, but their enemies are plotting for the new digital age.
Trump’s America might well be outmaneuvered and left behind in the imminent cryptocurrency financial world order.