In my previous article on Bitcoin (BTC-USD), I highlighted how the Canadian government effectively shut down the “future of money” argument. In my weekly subscription service, I picked March 7 for the low in BTC and the low in the Dow Jones. Bitcoin performed perfectly and stocks were a day later. I now expect governments to freeze BTC exchanges using Russia as an excuse. In this article, I will discuss more about it and try to predict the date using my proprietary model.
Time to Ban Russian Bitcoin Sanctions
When I predicted the BTC bottom last week, I saw the potential for a rally in the coin that could come with talk of Russian oligarchs evading sanctions.
It’s early in the process and Bitcoin has already shown some weakness in a Russian-linked market big title from Reuters: Russians are liquidating crypto in the UAE as they seek safe havens.
The story comes less than a week after Biden’s executive order on cryptocurrency, which I’ll talk about next.
In Russia’s story, it was reported that “Crypto firms in the UAE are inundated with demands to liquidate billions of dollars worth of virtual currency as Russians seek a safe haven for their fortunes.”
“A crypto firm has received numerous requests over the past 10 days from Swiss brokers asking to liquidate billions of dollars worth of bitcoin because their clients are concerned that Switzerland will freeze their assets,” an executive said. adding that none of the requests had been for less. more than $2 billion,” Reuters continued.
The report also cited “three Western diplomats” as being “increasingly alarmed by the number of Russians who in recent weeks have sought refuge in the United Arab Emirates for their fortunes, including property, and fear that some may act on behalf of those under sanctions.”
In my article about the Trudeau government effectively shutting down the use of bitcoin in the country, I see this spreading even further globally. Canada may even have served as a testing ground for a move to preserve the dollar’s status as the world’s reserve currency.
Take a closer look at Biden’s executive order on crypto
Many cryptocurrency investors and influencers were jubilant last week after Biden’s executive order on cryptocurrency finally landed.
According to CNBCthe order will focus on six key objectives:
- Consumer and investor protection
- Financial stability
- Illegal activity
- Competitiveness of the United States on the world stage
- Financial inclusion
- Responsible innovation
The latter two are less important at this point, but the White House will primarily seek to prevent illicit activity and protect the competitiveness of the United States on the world stage.
At a time when Western governments are trying to sanction the Putin government, allowing the Bitcoin loophole is not a possibility. The Reuters report is part of what I consider to be a build-up story ahead of a “temporary” suspension or freeze on bitcoin withdrawals.
In the Reuters article, it was also noted that major exchanges such as Coinbase Global Inc (COIN) and Binance were taking steps to “ensure that crypto is not used as a way to evade sanctions. and that they are working with law enforcement on the matter.” .”
Just as we saw with the Canadian situation, major exchanges were powerless to ignore government demands to freeze digital wallets. In the current context, they will also be powerless to deny global requests for Russian sanctions assistance.
A fact sheet was released by the Biden government to accompany the executive order and here are the two key takeaways:
Protect U.S. and global financial stability and mitigate systemic risk by encouraging the Financial Stability Oversight Board to identify and mitigate economy-wide (i.e., systemic) financial risks posed by digital assets and develop appropriate policy recommendations to address any regulatory gaps.
Mitigate the illicit finance and national security risks posed by the illicit use of digital assets by directing unprecedented coordinated action among all relevant U.S. government agencies to mitigate these risks. It also calls on agencies to work with our allies and partners to ensure international frameworks, capabilities and partnerships are aligned and responsive to risk.
In previous Bitcoin articles, I have noted that members of the Federal Reserve and the Bank of England have already called Bitcoin and stablecoins a threat to the financial system.
The Federal Reserve’s Eric Rosegren said the tether stablecoin was “one of the financial stability challenges the US central bank is monitoring.”
Last week he noted neither bitcoin nor stablecoins met the needs and requirements of an American digital currency.
Rosengren added “…bitcoin is a relatively slow technology, the price of the asset is very volatile, so I don’t think it’s a particularly good solution for retail payments. It’s more of a class alternative to a retail payment.”
Bitcoin influencers in this world assume that the governments of the world will all one day switch to Bitcoin and follow El Salvador’s lead.
Finally, the section on illicit activities stated that the agencies would be responsible for monitoring “working with our allies and partners to ensure that international frameworks, capabilities and partnerships are aligned and responsive to risk”.
About two days later, we begin to see the first reports of a risk that U.S. allies and partners may need to apply urgent action to.
Yes, the Biden admin supports encryption technology
Those who hailed the Biden order as a success for cryptocurrency adoption were encouraged by the industry-friendly comments.
Yes, of course, the US government supports blockchain technology and technological advancements made by the industry.
However, they are aware that China is making rapid progress with its own central bank digital currency (“CBDC”). The executive order states that the measures taken “will strengthen American leadership in the global financial system.”
How does sitting back and watching China dominate the blockchain industry and abandon centralization of money by the US government and the Federal Reserve strengthen US leadership in the global financial system?
The section of the fact sheet that comments on the CBDCs states that it:
Explore a US central bank digital currency with a focus on researching and developing a potential CBDC in the US, if issuance is deemed to be in the national interest. This effort prioritizes U.S. participation in multi-country experimentation and secures U.S. leadership internationally to promote CBDC development.
As I wrote in my Ethereum article, the government will support projects that help, not hinder, US dominance in the global financial system.
I now realize that a Bitcoin ban on major exchanges would likely extend to all currencies and would require a “temporary” freeze on exchanges so that money couldn’t just be kept in crypto until a later date. Such a ban should last for the duration of the Russian war efforts and it is very possible that any ban will be lifted just in time for the arrival of a US CBDC.
Bitcoin does not shine in the market turmoil
This should be Bitcoin’s time to shine. A war with Russia and Ukraine that threatens to engulf NATO and the West. Refugees are fleeing and markets are in turmoil as gold shows its metal as a safe haven asset with a move to $2,000, but Bitcoin is weak.
Lloyd Blankfein, the former CEO of Goldman Sachs, shocked Bitcoin fanatics this week when he nailed it with this Tweeter:
The reality is that professional investors avoid Bitcoin. It lost its refuge status and trading actions during Canada’s Freedom Convoy added to the damage. Decentralization is great, but the cryptocurrency world is still hopelessly connected to the existing financial system.
The weekly chart on Bitcoin is not one of strength, it is one of weakness. A failed second week of upside can often see a pullback the following week. I expect to see Russia-related Bitcoin sanctions sooner rather than later.
When we entered this period with the Russian invasion, governments still hadn’t lifted sanctions from the annexation of Crimea in 2014. If we see a sanction on Bitcoin, expect it to be lifted just in time for an American CBDC. It is also possible that the government or the Federal Reserve will then allow you to exchange your Bitcoin for the new currency at the market rate and remember that they have a history with that.
Franklin D Roosevelt seized all gold bullion and coins via Executive Order 6102 during the Great Depression, which forced citizens to sell at below market prices. Immediately after the “confiscation”, the government re-evaluated the gold rate at a higher price under the Gold Reserve Act 1934.
Bitcoin bugs may wish to sell at $63,000 when I warned them in March 2021.
The Russian invasion sees unprecedented sanctions imposed on the Russian government and all those close to it. The fear now is that the country’s wealthy are using Bitcoin as an escape from these sanctions. The drums are beating for a suspension of bitcoin withdrawals, or a complete ban on trading in a “temporary” move.
This could be lifted just in time for a government CBDC. Yes, the Biden administration supports cryptocurrency and wants the country to be on the cutting edge of technology, but Bitcoin will not be the backbone of this system. A former Federal Reserve official once said that Bitcoin is not suitable as a global currency in the United States and therefore is resigned to becoming a stablecoin at best. But we already know what central bankers think of stablecoins.