Hodl some Bitcoin
Over the last few weeks, 2 key events, namely the Canada Trucker’s Protest and the Russian invasion of Ukraine, have made it very obvious why holding some of your money in crypto is a very logical thing to do. While the argument on the utility of crypto continues, these events highlight how things can go wrong for everyday people like you and me, and how crypto is a good safety bet.
In this piece, I’ll share some context on what is going on in Canada and Russia, what actions the government has taken, and why this is a sign that it’s a wise choice to keep some of your money in crypto. Before we dive in, I do want to state that you might have a certain opinion on these issues — maybe you support what the governments are doing, maybe you don’t — and I’ll refrain from sharing who is right. But a series of events have unfolded and it’s worth learning from them as we think about the future. With that, let’s dive in!
Canda: Frozen Bank accounts
In the last week of January, there were protests led by truckers against the vaccine mandates imposed by the governments. The mandates required truckers crossing the US-Canada border to be vaccinated. Despite 90% of the trucker population being vaccinated, a minority felt this wasn’t fair and took to the streets to protest. The trucker used their massive trucks to blocks roads across the country including Ambassador Bridge, which normally carries $300 million worth of goods a day.
With growing pressure from citizens, the government declared a state of emergency. Armed with a wide range of powers, the government declared that it was going to freeze bank accounts of protestors. It went even further and said that it would also freeze accounts of people who had contributed to the protests. Imagine you donated $10 towards this trucker’s protest - Boom! You now have your bank account frozen. These bank freezes have been lifted now, but the act and its speed, gather a lot of criticism against the Canadian government.
Takeaway
I’ve been a part of a few protests in my life, especially as a student. I’ve also supported a few causes via small donations. The fact that these small actions, for something that I and a bunch of other people believe in, could result in me getting locked out of my bank account is quite scary. In the case of the Canda protestors, the account got unfrozen pretty soon, but it showed the world that governments can do this with the entire world watching — it’s not a figment of imagination. To add to that, this is happening in a country like Canada, which is already very developed and liberal — so it’s naive to think that other governments arent’ capable of following suit. Governments freezing bank accounts has always been possible, but we’ve rarely seen it play out. This was a good reminder.
Ukraine: Forced to Flee
Russia recently launched a full-scale invasion into Ukraine which has led to millions of people being displaced. As Russian troops march into the towns and cities, everyday Ukrainians are grabbing whatever they can and trying to get away from the violence and bombing. We’re at the start of what feels like a new refugee crisis as many Ukrainians flee into neighboring countries. Even though the world has stepped up and countries are opening up their borders and sending aid, think about what it really means for these new “refugees”. They have left everything they own behind and as of today, don’t know if they’ll ever be able to go back home. The state of Ukrainian banks and their assets is uncertain. Even if citizens do go back home, they will find it very different as compared to when they left.
Takeaway
It’s the 1st January 2022, the beginning of the new year, and you’re making resolutions. 60 days later, you’re packing up whatever you can carry with you and fleeing your home as bomb explosions get louder by the day. You don’t have time to withdraw all your money, sell your stocks, pack up your gold, etc., and carry it with you. If Russia does succeed, the money in your Ukrainian bank will every hard to access. If you’ve invested your savings in a house, you don’t know if that’s still standing when you get back. I’m not sure about you but I’ve never thought I could be a refugee one day. But so did the million, who are refugees today in foreign lands, deprived of all their assets and way of living. Money, which is supposed to be a safety net for many, ironically fails to do its one job in times like this.
Russia: Bank Run
In the midst of this invasion, things are not looking good back in Russia. They have been slammed with sanctions and the Russian rouble fell to a record low. Some Russian banks have been blocked from the SWIFT payment system. In the midst of all this chaos, everyday Russians are flocking to ATMs to get access to their money. The country has also banned moving money abroad to help stop the falling value of the currency. The future isn’t very bright either. Rising inflation and economic slowdown are likely to follow as the impact of the international sanctions are fully felt. This will affect everyday citizens irrespective of their views on the invasion.
Takeaway
As a Russian, maybe you support the invasion, maybe you don’t. It doesn't matter. The currency of your wealth just fell to a record low and prices are going to go up. The average Russian has no part to play in this invasion, and yet, their future looks pretty bleak as of today. For people not in Russia, but depending on remittances from Russia, they’re affected too. And this is Russia we’re talking about — a nuclear superpower, the 11th largest economy in the world, the R in the BRIC, seen at par with India, China, and Brazil. This is something I never think about, but if it can happen to a country like Russia, it can easily happen to any of the 195 countries.
Crypto as a hedge
Each of the events above shows how little control we have over our money today. This is where crypto has a role to play. Unlike fiat currency, cryptocurrency is beyond the control of a single government. It can be moved freely and easily across borders and no one can “freeze” your money. In each of the cases above, your crypto would have been safe and accessible to you at all times.
I do want to highlight a few nuances to this.
- Cryptocurrency on exchanges does not qualify as you do not have true ownership over your funds. Governments can instruct exchanges like Coinbase to freeze your account and halt trading — just like banks. You need to have access to the private keys of your wallet if you truly want to own your money. Not your (private) keys, not your coins.
- It is still not feasible to use cryptocurrency for everyday transactions. While stable coins remove the volatility issue, a lot of merchants may not accept crypto as a method of payment. So you might have a lot of Bitcoin, but if others don’t accept it, there’s not much use to it. This is changing fast with more and more countries making it a legal tender.
- Owning your money requires a higher level of discipline. Self custody and managing your private keys aren’t simple and most people who have some crypto don’t know how to do this. Unlike banks, there’s no customer care you can call if you forget your private key. We’re not used to this and it’s hard to get used to this level of responsibility
But despite these challenges, it’s now possible to truly own your money with crypto and protect yourself from it being seized or frozen. Given the events which have unfolded in the past few weeks, I think it's a logical and wise decision to do so.
