Bitcoin

Russian Sanctions Continue to Wreak Havoc On Bitcoin Miners

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The U.S. Treasury continues its campaign to accelerate hyperbitcoinization. Last week, the Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against BitRiver AG and ten of its Russia-based subsidiaries. The sanctions are not intended to stop Russia from mining cryptocurrency, but to address Russia’s ability to “monetize its natural resources”. Bitcoin has the potential to capture the value of stranded energy in Siberia. Turns out the government understands Bitcoin’s environmental capabilities better than most nocoiners.

BitRiver is a data center parked next to abundant hydroelectric power. It is in the business of renting out rack space for mining rigs. As a result of recent sanctions, U.S. customers like Compass Mining have been forced to liquidate mining equipment that cannot be moved out of Russia. Selling rigs to Russians at bargain bin prices seems like an odd way to stick it to Putin. The goal may not be to harm Putin, but to impose capital controls on Americans.

There is a myth that the U.S. dollar is backed by thin air. In reality, the dollar is backed by the world’s dependency on oil. In the post-Industrial era, crude oil reserves became the world’s greatest source of wealth. Other energy sources exist, but few have the same portability (except nuclear power, which has been tarnished by a decades-long smear campaign). Bitcoin mining captures “stranded” sources of energy and converts them to wealth. This is the same rationale behind El Salvador’s efforts to mine bitcoin using geothermal energy from volcanoes.

David Carlisle, vice president of policy and regulatory affairs at blockchain analytics firm Elliptic and government shill, called the recent sanctions “a pre-emptive strike to prevent Russia from leveraging its energy resources for crypto-enabled sanctions evasion." He says, "OFAC is clearly intent on preventing Russia from following Iran's playbook," given that Iran has purportedly generated as much as $1 billion by mining bitcoin in the past decade. This is barely a fraction of a percent of Iran’s GDP, and less than one percent of the country’s annual export value.

The biggest threat is not that problematic countries will mine bitcoin to evade sanctions, but that the world will realize the value of stranded energy sources, and cease to be held hostage by oil and the petrodollar.

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Dave is a former FX trader who has been trading crypto since 2015. He is long BTC.

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