Freedom for Dissidents, without More Power for Dictators

Bitcoin proponents say bitcoin is freedom technology – that it helps people save and transact safely in authoritarian regimes, and even aids in the fight against authoritarianism. Indeed, 21 human rights advocates from 20 different countries sent an open letter to Congress in 2022 saying this. They cite bitcoin’s open and permissionless network. Bitcoin’s being permissionless makes it inclusive, resistant to censorship, and relatively private. 

At the same time, bitcoin proponents have sought to mitigate fears that bitcoin could be used by the very same authoritarians, oligarchs, and criminals to evade sanctions and commit crimes. Proponents claim that it is impossible, or at best impractical, for these activities to occur through bitcoin.

These claims appear to be in conflict. How can bitcoin aid freedom-fighters but not oligarchs and criminals, when it seems that the very features of the network cited as helpful in the former case are that the bitcoin network is indifferent to who is trying to use it–criminal or activist?

The bitcoin network’s ledger is public and widely distributed. The ledger can be self-hosted, or viewed on sites such as btcscan.org. Every transaction that has ever occurred can be found. So it’s impossible to hide transactions like Ron Swanson hides his gold, buried in the ground out of the view of everyone. Instead, the only way to hide is as Waldo does: Obscuring oneself in a large group.

With these facts in mind, it’s easier to see why individuals facing oppression or fighting for freedom can use bitcoin to achieve their ends more easily than criminals, oligarchs, or authoritarians.

The first reason concerns transaction size. According to https://www.bitinfocharts.com/bitcoin/, the mean bitcoin transaction in the past 24 hours is 0.516 BTC, presently worth about $33,000. The median transaction is for 0.00096 BTC, presently worth $61.46. This means that half of bitcoin transactions are for less than $62. There are about 15,000 bitcoin transactions per hour, and 360,000 per day. The vast majority of those are between $0 and $1,000. So, if you are searching for someone whom you suspect spent $500 on a particular day, you have hundreds of thousands of transactions to search through. If, by contrast, you are searching for someone who you believe is sending millions of dollars, you have just a few transactions to search through. If you’re searching for someone who sent a billion dollars, you likely just have one transaction to look at. Of course, a person can split a transaction between multiple payments or use a payment layer built on top of bitcoin like the Lightning Network to make their transactions more discreet, but trying to move millions or billions of dollars that way is logistically very complicated when there are far easier options. Bitcoin is simply impractical for such a use case.

The second reason is that people closely watch oligarchs, authoritarians, and major criminals, but they don’t watch the millions who use bitcoin to survive. For one thing, there are too many people to watch in the latter. For another, you don’t know who they’ll be. Consider an authoritarian dictator who’d like to cut off his opponents financially. Aside from its public leaders, he doesn’t know which of the millions among the rest of the population are part of the resistance, and he doesn’t know who among those will use bitcoin to evade his attempts at financial control. And even if he did, he wouldn’t have the resources to monitor that many people, and it wouldn’t be worth the effort. By contrast, there are relatively few oligarchs, authoritarians, and major criminals, most of them are comparatively well-known, and the people going after them have the resources to monitor their attempts at using bitcoin, and it’s worth using those resources for that purpose.

Third, oligarchs, authoritarians, and major criminals have better options than using a public ledger. For one, they can use private ledgers – banks. In addition to the significant amount of control that oligarchs and authoritarians usually have over banks in their own countries (is Rossiya Bank really going to turn down a deposit from Putin?), multinational banks have repeatedly shown a willingness to bank unsavory characters. Standard Chartered, Deutsche Bank, JPMorgan Chase, HSBC, UBS, BNP Paribas, TD Bank, and many other banks have collectively been fined over $10 billion for failing to comply with anti-money laundering laws. Unless banks can be compelled or coerced into divulging client information, they are perfectly safe places for those with access to hide. Another option they have is cash. The US $100 bill is still the favored currency of many, since physical cash is fungible, identifiable, transportable, and most importantly, far more private than bitcoin. Freedom-fighters and democracy advocates often lack access to US dollars, and their own country’s currency is often devaluing due to the actions of the authoritarians they’re resisting.

Beyond the practicalities above, there is also a more fundamental point: Dictators wield state power to benefit themselves and punish others. This includes, and often begins with, their power over the money. The more that power shifts from the state into the hands of the people, the harder it is for dictators to weaponize the financial system against their own populace and stifle movements for freedom.

Dr. Bradley Rettler is Director of the Bitcoin Research Institute and Professor of Philosophy at the University of Wyoming, and a Senior Fellow at the Bitcoin Policy Institute.