Sovereign Forfeiture Stalks Bitcoin

Governments have become hostage to their own statist and isolationist impulses, executing monetary manipulation as a tool of trade policy.

Saifedean Ammous.

Bitcoin now It is a state matter. Being precise, it begins to be so. Although there are countries, such as El Salvador, Bhutan or Venezuela, that have been involved for years, in most of the world it is still an incipient phenomenon. But real.

As commodity digital, like gold 2.0, the countries of the world are already noticing how It is a non-renewable resource that they cannot afford to lose. Because, in its scarcity, Bitcoin imposes a zero-sum game: the bitcoin that you have, I do not have. This poses an adversarial relationship and a race between countries to accumulate what is most likely the foundation of value in the monetary order to come.

In a world in which 95% of all bitcoins to exist have already been issued, of which at least 50% are in the hands of individuals and just 2% in the hands of States, The real adversary is not other countries, but the citizens themselves.

Yes, the ghost of confiscation re-emerges, as every day it leaves its ghostliness and gains more substance due to the growing interest of States in Bitcoin.

It should be remembered that, in the 20th century, it was not only the United States in 1933, with its executive order 6102, that confiscated the gold of its citizens. The Soviet Union (1920); Italy (1935); Germany (1933-1945); Czechoslovakia (1939); China (1949); United Kingdom (1966); South Korea (1977). At least seven countries in the 20th century violated the private property of their citizens, justified in the national interest. And this despite the fact that, unlike bitcoin, it was not individuals who had the largest percentage of the gold supply.

Just two days after the capture of Nicolás Maduro by the United States, journalists began to appear in mass and traditional media outlets such as CNBC talking about the “opportunity” that it represented for the US to confiscate some alleged 600,000 BTC, which it is speculated the Venezuelan government could have. It is no longer exclusively about oil, metals, minerals and other resources. Bitcoin also enters the war appetite, something unprecedented in history.

Although there is no official information in this regard – neither that the Maduro government has accumulated that amount of bitcoin, nor that the Trump government is thinking of seizing it –, what has never happened before is that within the collective imagination the looting of BTC will be contemplated as spoils of war.

Although the 328,000 BTC that the United States owns come from seizures, a confiscation in a war context had not been considered. This represents a symbolic change with profound consequences, as it speaks of a radical shift in the perception of this monetary instrument.

It is not the first time that Bitcoin plays a role in a belligerent context at the Nation-State level. Let’s remember how in the first months of Russia’s invasion of Ukraine the bitcoiner community donated more than 100 BTC to the Ukrainian NGO Come Back Alive. In contrast, here the will was to contribute, not take away.

Since bitcoin is money for enemies, after sanctions were imposed on Russia in which it was excluded from the Western financial system, they turned to bitcoin as uncensorable money. This has happened in other sanctioned countries, such as Iran, which since 2022 has accepted bitcoin for imports, and has recently begun to accept it as a payment method for the purchase of ballistic missiles, drones and other military weapons. We have talked extensively about the use that Venezuela has given to cryptocurrencies, also sanctioned, in NoticiasVE.

It is worth mentioning the cases of El Salvador and Bhutan as buyers and miners of Bitcoin. Even, Bitcoin becomes a matter of international relationsof understanding agreements and bilateral alliances between nations to educate on adoption. Such has been the case of El Salvador with Pakistan, a strategy in which the United States has also participated; as well as with Bolivia; Argentina; Uruguay; Paraguay; and Kazakhstan.

The regional interest of Latin American governments stands out, by far, having counted on El Salvador as a world pioneer in officially adopting it at the nation-state level.

Until now, the way of adoption and exploration in the world has been, to give it a name, benevolent. Government-level mining, for example, has caused a small country like Bhutan to have more BTC per capita than the United States. Indeed, mining, which involves high energy demand, is the aspect of Bitcoin where geopolitics plays a most significant role. Access to cheap energy attracts investment and can be a source of income for a country, but everything depends on stability and legal security, as the cases of China and Paraguay have shown, which scared away their miners.

All in all, mining still has the problem that there is only less than 5% of the 21 million bitcoins to be issued, that is, just over 1 million BTC to be issued in the next 114 years. An amount that state plunder could consider loweven more so knowing that they are unable to accelerate the pace of broadcasting as they like to do so much.

Meanwhile, there are more than nineteen million bitcoins already in circulation, in the hands of individuals, companies, institutions, including bitcoins that are considered lost. Let’s not rule out that it is a government that carries out the quantum attack that ends up stealing Satoshi’s BTC.

Depending on the custody strategy there are different risks. As they say, if they’re not your keys, they’re not your coins: any BTC held by custodians such as exchanges is subject to confiscation in extreme cases. Spain is already paving the way for confiscations justified in tax evasion.

Argentines will remember well the Corralón of 2002 – not the Corralito – in which Eduardo Duhalde forced the conversion into pesos of all dollar deposits, justified in the Public Emergency Law and the Reform of the Exchange Regime. This also happened in Mexico (1982); Bolivia (1982); Peru (1985), just to mention the regional cases. If it was already done with dollars, what prevents it from happening with bitcoin?

Obviously it would be an extremely unpopular measure since it does not mean exchanging bad money for worse, but rather stealing the scarcest asset in the world for something that can be printed at will.

The case for secret self-custody without KYC sounds advantageous, but it also has its risks. There have been threats in the past to restrict self-custody; In that scenario, if they found out that you have undeclared BTC, they would have the legal justification to try to expropriate you. Sure, we know that the non-confiscation of a well-protected bitcoin introduces friction to this scenario, but few people resist a good wrench attack.

The intention of all this is not to cause panic or paranoia. It’s being realistic. It is a call to reflection and privacy. No one should rule out these scenarios when deciding how to protect their property and it is always necessary to remember that new government administrations can bring unpredictable changes. Freedom is not something that can be taken for granted.

As we mentioned, it is not the first time in history that profound changes in the global monetary order cause confiscations. In the 20th century, as we mentioned, was the fall of the Gold Standard. In the 21st century, this barely 50-year-old experiment that is the Fiat Standard is faltering, and there is a high probability that Bitcoin will become the basis of the next monetary order. And in that context, many regents will not hesitate to confiscate.