Then They Fight You
The War Against Bitcoin Self Custody and Bitcoin as a Medium of Exchange Has Begun
First they ignore you.
Then they laugh at you.
Then they fight you.
Then you win.
-Nicholas Klein, a trade union activist, in 1918
During the first Bitcoin epoch (2009-2012), no one aside from developers, hardcore libertarians and autists from various backgrounds knew what Bitcoin was. In other words, back then, it was largely ignored.
During the second and third Bitcoin epochs (2013-2020), people began to snicker at those who were into Bitcoin. “Look at those nerds with their magic internet money,” they’d say. (The nerds are the ones snickering now, as they’re rich as shit.)
During the fourth bitcoin Epoch (2020-2024), the fight began. I’d say it officially started with Operation Chokepoint 2.0 in early 2023, but there’d been some antagonism from the likes of Senator Elizabeth Warren and others in power earlier than that.
Now, in the wake of the fourth Bitcoin halving — at the onset of the fifth Bitcoin epoch — the war against being able to privately self-custody your BTC and use it freely is afoot.
Crackdown on Bitcoin Mixing Services (and Lightning Wallets)
This week, the US began it’s crackdown on privacy-enhancing technologies related to bitcoin.
Wednesday, April 24: Samourai Wallet Founders Arrested
On Wednesday, the founders of Samourai Wallet, a privacy-focused Bitcoin wallet and mixer, were arrested and charged with money laundering and operating an unlicensed money transmitting business.
I said that something like this would be coming in this edition of the newsletter, as I claimed the US powers that be would begin to crack down on people who self-custody bitcoin, arguing that Americans who want price exposure to bitcoin can just buy the ETFs now. They’ve yet to make that exact argument, but they have begun with the crackdowns.
I wrote a piece on who these crackdowns would hurt most soon after the news broke. (Click image to read.)
Oddly enough, I’d spent some days prior to this news breaking with Anna Checkhovich, Alexei Navalny’s former CFO.
Anna helped manage Navalny’s bitcoin, which was a financial lifeline for him and his team, as Putin had had Navalny debanked years before he murdered him.
I quoted Anna in the piece I shared above if you’d like to learn more about her work.
TL;DR — Mixing services are key for human rights activists who need to protect the identities of both their donors and the activists who receive bitcoin from them who operate in jurisdictions under authoritarian control. When we crack down on privacy-preserving financial technologies like Bitcoin mixers, we hurt those who need these technologies the most.
Thursday, April 25: Phoenix Wallet Stops Serving US Customers
The following day, Phoenix Wallet, my favorite non-custodial Lightning Wallet, announced it would stop serving US customers.
I don’t know whether US officials or regulators threatened Phoenix in any way, but they obviously felt the heat in the wake of Samourai Wallet being declared an “unlicensed money transmitter,” and reacted accordingly.
I used to use this wallet to donate bitcoin to Orphans in Uganda. Thanks for making it harder for me to do so, fascist three-letter US agencies.
Friday, April 26: Some Good News
On Friday, the drama died down for a minute, and I got a moment to visit the makers of Heatbit, a space heater and air purifier that also mines bitcoin.
You literally plug the thing in and it heats your home, cleans the air and mines bitcoin simultaneously, using no more energy than a space heater would normally use.
Welcome to the future.
Saturday, April 27: Wasabi Wallet Stops Serving US Users
Saturday morning, Wasabi Wallet, which allows for coinjoins, a type of BTC mixing, announced that it would be halting its service for US residents.
I was hardly surprised at this point.
Warnings
As the US continues in its march towards authoritarianism, you’ll likely see more and more Bitcoin-related companies stop serving US residents.
As my buddy OKIN pointed out, more freedoms are being taken away from US citizens, while citizens of the “developing world” (I don’t like this term) are being granted more access to technology.
The US is a descending country, while many developing countries are now ascending countries.
While I’m quite happy for these developing countries, I’m deeply saddened by what I’m seeing here in the US.
Everything Is A Money Transmitter
So, what’s the end game here?
I’m of the belief that the US is trying to label non-custodial Bitcoin/crypto services or products money transmitters.
Why would they want to do that?
Well, because then anyone who uses any sort of non-custodial bitcoin/crypto wallet — hardware or software — is committing a crime if they don’t have a license for it.
Let me put that another way: You send me some bitcoin from your Ledger Nano S Plus to pay me for something, and you can now have charges pressed against you if you don’t have a money transmitter license.
And what do you need to do to get a money transmitter license? Well, you’ll need to provide the public addresses associated with your bitcoin wallets, giving the government the ability to monitor it.
This both destroys privacy and slows down bitcoin’s becoming a medium of exchange.
Why does the US not want bitcoin to become a medium of exchange?
Well, because it’s $34 trillion in debt, and that debt is increasing by approximately $100k per second (you read that correctly).
One of the only reasons the US dollar still has value is because of its network effects, or a large amount of people using it. When people stop using it and start using bitcoin instead, the USD really starts to fall apart.
This will eventually happen regardless of the US’s oppressive efforts, but the US government, like many governments around the world, are trying to trap you in the old system right now.
They’re trying to do everything they can to stop you from entering a system that respects the value of your labor (Bitcoin), as opposed to a system that extracts from you to fund an ever-growing bureaucracy whose main purpose is to perpetuate itself (the traditional financial system + government, which are basically the same entity.)
Bitcoin Is Free Speech
The most fascinating part of this crackdown is that legal precedent shows that bitcoin isn’t even money — it’s speech — which means, technically, the DoJ doesn’t have grounds to arrest the Samourai founders.
Bitcoin is just code, and it’s a code that no one person controls. The US government knows this, yet different agencies classify bitcoin differently, according to how it benefits them.
Again, anything to extract wealth from people and stop people from using bitcoin as money.
Choose A Side
My guess is that this fight will escalate into the next few years. The US government will make more martyrs of more open-source software developers and perhaps even everyday bitcoin users.
They’ll do this because the pace at which they lose control over the dollar’s value will only accelerate, and they’ll do anything they can to maintain whatever semblance of control they have.
Things will get even uglier when they try to implement a CBDC, a tool they can use to control and surveil practically every dimension of your life.
So, if you want bitcoin to be a monetary option as we move into the future and Bitcoin to continue to be a check on the government’s power, please fight for it. I’ll share resources on how you can help do that in future editions of the newsletter.
All is not yet lost, but it soon will be if you continue to let politicians and bureaucrats at three-letter agencies take from you.
Best,
Frank
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