With Russia War On The Brain, Could Congress Force A Shot Into DeFi?

Earlier this month, Senator Elizabeth Warren and 10 other lawmakers introduced the “Digital Assets Sanctions Compliance Improvement Act of 2022” which, make no mistake, targets two things: Russia and your Bitcoin.

It’s cryptocurrency mole season in the western world, with Canada ending Bitcoin donations to truckers protesting their country’s draconian policies against Covid, and now the US government is trying to figure out how to stop individuals and Russia-sanctioned companies to use bitcoin instead of dollars.

The Warren Bill would “impose sweeping restrictions on people who build, operate, and use cryptocurrency networks even if they have no knowledge or intent to help evade sanctions.”

This bill is going nowhere. This would make life miserable for Kraken and Coinbase, although Coinbase basically said that Russians (some 25,000 to be exact) were no longer welcome on their platform.

Russia already appears to be leading the way in using cryptocurrencies to repatriate assets held overseas.

Last week, Russia’s central bank allowed its biggest consumer bank, Sberbank, to use digital assets and not just rubles. That means cryptocurrencies, bitcoin or what have you. (Although probably just Bitcoin.)

So, to answer the story question – will a very angry power be able to stop decentralized finance? No. They could blow up Bitcoin. But think of Bitcoin as the Obi-Wan Kenobi of the cryptocurrency universe. If you remove it, decentralized digital currencies will only get stronger.

“The whole world will know that the money is flowing back to Russia in cryptocurrency, but since crypto is an unstoppable payment method, there’s not much they can do about it,” said John Sarson, CEO and co-founder of Sarson Funds. Digital Wealth News on March 22.

The Central Bank of Russia’s decision to allow Sberbank to do crypto business comes at a time when the country is facing unprecedented economic and financial sanctions, and when cryptocurrencies, obviously directed by Bitcoin, pose a huge threat to the central bank’s deployment of their own programmable system. digital currencies. Russia’s central bank was no exception to this – they never liked Bitcoin. Now, out of necessity, they see that when the centralized powers nullify your ability to transact, you must leave the reserve to enter the decentralized universe.

Sarson, who runs a digital asset fund in Massachusetts, said Sberbank’s crypto decision means Russians can now convert and hold cryptocurrency as the country experiences a currency crisis. This allows them to stabilize their wealth and diversify their assets. It is probably easier to buy crypto from Sberbank, for example, than for Russians to stock up on Chinese yuan.

Additionally, many of these entities and individuals, forced out of fiat currencies by the falling Russian ruble and international sanctions, may be reluctant to switch back to the ruble, Sarson said. They can decide to only reconvert their crypto assets if it’s necessary to make a car payment, he told DWN.

DeFi: a moving target

Bitcoin is the easy target. It’s like a big square warehouse in an arid field, with central bank drones hovering over it, wondering when they should fire the killing shot, and if that’s really going to knock it offline.

If so, there are many other coins that enable financial transactions. People can just switch to them. Defi is therefore a moving target. It’s not such a big and sexy trophy, but there are too many players to eliminate them all at once, if at all.

One of the main concepts of DeFi is to serve the “unbanked”. We like to imagine the unbanked as the poor Indian farmer living off wheat and millet, cooking from a hearth in a house the size of an average American teenager’s bedroom in the suburbs.

But many Russians are currently “unbanked”. They are not poor.

Canadian truckers were temporarily unbanked.

Who’s next?

Defi is an end around those centralized government powers that control the money. They turn off your lights and DeFi is your power generator.

Over the past month, one of the most well-known DeFi projects, Stellar Lumens, has seen its coin increase in value by 11.6% since the start of the Russian war in Ukraine. In contrast, the S&P 500 is up 3.6%. Bitcoin is up 13.9%. It’s nothing. Leading public DeFi blockchain protocol Terra (LUNA) is up 51.8%.

“DeFi has the potential to enable people who are not served by the current system – the 5.5 billion people worldwide classified as underbanked – to access the new digital economy without facing human biases. and systemic aspects of the current system such as discriminatory lending practices. and policies,” says Anna Stone, chief growth officer at eToro and co-founder of GoodDollar, which aims to create a global universal basic income through crypto.

Decentralized finance, or DeFi as it is commonly known, is an open infrastructure for digital money. With DeFi, anyone with an internet connection can access financial services, without jumping through the bureaucratic hoops required by traditional institutions. This includes buying, selling, borrowing, lending and saving.

Currently, centralized finance only serves individuals and banking organizations who have government-issued identification that can pass know-your-customer and anti-money laundering regulations. Additionally, you need a credit or real money history to make opening a bank account worthwhile.

This is not where most of humanity lives. But just as importantly, in a time when people can be kicked out of their banking system because of political views that don’t coincide with an incumbent power, being kicked out of the financial system isn’t just for presidents in emerging markets. at war and their allies more.

Hence, the increased use case is building for DeFi.

But, is it worth it?

I own Lumens. I don’t use it to make payments. But I have it. And I invest in it. Maybe one day I will need it.

“You don’t need to understand exactly how DeFi works, or have a use case to benefit from DeFi,” says Stefano Jeantet, board member of HyperDex, an asset management platform specializing in decentralized finance tokens.

“The inclusive, permissionless, and autonomous nature of DeFi means anyone can code a Federal Reserve and there’s no one to stop it,” says James Taylor, Chief Commercial Officer at Unizen (ZCX), a centralized-decentralized hybrid exchange, or CeDeFi. “We’ve seen teenagers building basic elements of DeFi, which makes it really exciting to be a part of this space.”

Fine. But can I shop at Luna or Lumens if my credit card is blocked for not “supporting everything” this month, or lay a wreath on my door in support of Dear Leader?

I mean, it’s plausible now, am I wrong? You may one day need digital currencies (not the digital dollar) as more than just a speculative investment traded on Kraken.

Lots of people get Bitcoin wrong. The moonshot may have already happened. Attacks on Bitcoin by centralized powers have defeated it. But Bitcoin still holds.

A year ago, investment guru Ray Dalio warned that one day Bitcoin could be shut down by the Fed.

“Most likely under certain circumstances,” said the founder of Bridgewater Associates, “bitcoin would be banned, just as the government banned citizens from holding gold in the 1930s.”

So, central bankers, try your luck with Bitcoin. Decentralized finance developers will instead welcome Bitcoin refugees to their platforms and tokens.

The battle between centralization and decentralization is raging. Centralization has the advantage. Many people in the DeFi space see it as a better financial architecture, disrupting intermediaries. But centralized systems can also do this on newly created blockchains.

“Consider DeFi as an alternative to the existing financial system, which is plagued with a number of inefficiencies, both in terms of time, cost and energy,” says Jeantet of HyperDex. “Users are forced to pay high fees to intermediaries as well as days of waiting for a simple bank transfer to settle. With the technology we have today, this is frankly ridiculous. Take a closer look and you can easily start to see the inevitability of decentralized finance.

*The author of this article owns Bitcoin and Lumens.