Putin’s Bitcoin Billions: Cryptocurrency Wealth Preservation In Times Of Conflict

Journalist:
Gordon Hall
April 30, 2014

Responding to events in Ukraine and Crimea, the Obama administration has barred certain prominent Russians from entry to the U.S. and sanctioned company and private fortunes. Yesterday, the heads of major Russian oil and energy companies, Rosneft and Gazprom, were both sanctioned. It appears even the rumored private fortune of President Putin may be pursued if the political situation deteriorates. In 2007, the CIA and Russian political expert, Stanislav Belkovsky, claimed Putin’s worth exceeds $40bn.

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[dropcap size=small]I[/dropcap]n 2012, Mr. Putin declared his income as $115k and his bank account at $180k. Quite possibly true, yet a full declaration of his investment and property holdings is notable by its absence. In 2011, RuLeaks.net, the Russian version of Wikileaks reported that Putin owned a secret Black Sea dacha valued at close to $1bn. It’s unclear whether Mr. Putin indeed owns such a property or if it’s another perk provided by the Russian state to its President. A Russian opposition leader reported that Mr. Putin has 43 aircraft, 20 residences, 15 helicopters and 4 yachts as such fringe benefits.

Incidentally, Ruleaks was subsequently blockaded by Russian ISPs just as Wikileaks suffered embargo by Western bank and payment services. The two sides have more in common than they realize.

At any rate, the bulk of Mr. Putin’s reputed holdings is said to comprise holdings of major oil and energy companies. Commodities trading firm, Gunvor, has been named as one such company.

Correction: At Gunvor’s request, this wording of this article has been changed to reflect the fact that Gunvor can no longer be accurately described as a “Russian” company. Gunvor’s Russian co-founder, Gennady Timchenko, recently came under US sanction. As a result, in March 2014, Mr. Timchenko sold his share in the company to his Swedish partner, Torbjörn Törnqvist. The company is registered in Cyprus and headquartered in Switzerland.

While Guvnor denies any alleged links to Mr. Putin, the US Treasury Department stated in regards Gunvor:

“Putin has investments in Gunvor and may have access to Gunvor funds.”

and

“We remain confident that the information on the relationship between Putin and Gunvor is accurate.”

President Obama has signed into law the pursuit of assets owned by Russian or allied high officials judged guilty of “significant corruption.” America may target Putin if they ever trace his accounts, but certainly they are targeting his “inner circle” as a means to exert pressure over what it considers an unacceptable situation in Eastern Europe. This despite their involvement in creating the situation, which displays a foreign policy approach of which the world is tiring.

Yet even before the Ukraine crisis, Cyprus bank accounts were seized in a supposed effort to trap the laundered funds of Russian oligarchs. It remains possible that the economic ruin of Cyprus by bail-in was a “necessary sacrifice” towards seizing funds suspected as belonging to Mr. Putin.

According to Interfax, Russia has voiced “disgust” at fresh sanctions and vowed some form of retaliation. China doesn’t think they’re a great idea either.

Russian Retaliation

Reliant as it is on Russian energy imports and trade, the EU may well lack the US appetite for increasingly severe sanctions. Yet if such sanctions ratchet up to the point where Russia has no further incentive to cooperate economically with “the West,” they won’t. And perhaps China will join them. Many nations, such as France, are clearly signalling their desire for a new global reserve currency to replace the debt-laden US Dollar.

Some nations have forged ahead on their own with such arrangements. Russia and China are close to a massive gas deal priced outside of Dollars, and many similar deals have been concluded of late.

Russia and China and other nations have also been accumulating record amounts of gold for some time, a clear sign of interest in preserving wealth outside of political currency. This is a hopeful sign for Bitcoin.

It should go without saying that if the collapse of a few American investment houses was sufficient to spark the 2008 financial crisis, a significant or even majority share of the world’s population opting for trade priced outside of Dollars would… upset the apple-cart a bit, if not overturn it completely.

Undeniably, these are very uncertain times, in which any power no longer deriving particular economic benefit from the financial status quo may well consider the system’s demise as inevitable and seek to hurry the day to their strategic advantage. Citizens should prepare accordingly.

Putin and Bitcoin

It is quite likely that, whatever his wealth amounts to, Mr. Putin would object to it being denominated in USD. Nevertheless, some estimates place Mr. Putin’s private as high as $70bn. This would put him in the running for Forbes’ richest man. Even $40bn would make Putin the richest man in Russia, and no poor relation to world elites.

If we consider the “low-ball” figure as credible, then before seriously recommending Bitcoin to Mr. Putin as a wealth-preservation method, we must recognize that $40bn is least seven times the total value of all existent BTC. Currently, Bitcoin’s market cap is near $5.7bn after reaching a record high of $13.9bn in mid-December 2013. That said, Bitcoin is the perfect tool to avoid monetary sanctions. A sophisticated user may:

  • transmit funds in an anonymous fashion,
  • with no regard to national boundaries,
  • near-instantly.

Capital controls, of which sanctions are but a targeted form, are no match for the patient application of blockchain technology.

What’s missing in all the controversy over Mr. Putin’s supposed wealth is clear proof of its linkage to Vladimir Putin. It seems such proof would be politically damaging to Mr. Putin. As such, one would expect Mr. Obama to have produced it by now, if available. This implies that poor, propagandized Putin is truly of modest means… or that he has an especially clever accountant, as especially large fortunes tend to attract.

Given the latter case plus the Russian state’s apparent low opinion of Bitcoin, he may not see the need to securely diversify his portfolio through cryptocurrency. Yet surely those among his circle who face asset freezes might consider it as their best option to quietly move their funds out the East-West crossfire.

Bitcoin and Conflict

To achieve maximum success, Bitcoin must become a viable monetary option for anyone, from a migrant laborer wanting to send money home to an oligarch seeking to avoid harsh Western sanctions on his fortune.

Bitcoin must be digital Switzerland, neutral as to who uses its financial services. This is not important only for the success of Bitcoin, but to ensure negotiation between hostile nations remains possible. Diplomacy depends on national leaders having reliable means of communication and means of trade, even if the silly bastards have wrecked each others’ financial systems in an argument over whose fiat Ponzi scheme is superior.

Trade averts war. Even in cases where we strongly disagree over who owns what, we agree that things like gold and instantly-transferable and anonymisable digital assets hold value. Agreement is the basis of negotiation. Deals can be struck over mutually-acceptable assets, contracts entered into with escrow and oversight by neutral agencies. Sane people generally prefer constructive deals to devastation all round, right?

If Bitcoin is to prove the first apolitical digital currency, an asset to the people as much as to world powers, this is the path for it to take.

Steps Towards Better International Representation

Nomination of Bobby Lee to the Bitcoin Foundation board would be a positive step towards a more international composition, whatever one’s opinion of the Bitcoin Foundation as a credible institution. If Lee were to assume semi-official responsibility for accurate and accountable reports of PBOC pronouncements, that could at least reduce FUD-based market volatility.

Personally, I’m happy to write for this site in one of eight featured languages. More dialogue, trade and gathering is necessary between the world’s scattered geek tribes, even if the bigwigs are staring each other down.

The international community.

How Bitcoin’s Success Promotes Peace Through Trade

If, when or as:

1) national ports are are shutting down to foreign goods, termed variously haraam, decadent, non-kosher, unethically-sourced or illegal – “black market goods” in other words,
2) trust across the net’s getting cratered by cyberwar attacks and a proliferation of scamming, spamming, snooping, censoring, cracking, hacking and other bullshit,
3) major fiats stop trading for one another through Forex markets, causing banking shocks which shut down regular economic activity, &
4) the media’s full of sabre-rattling (not gonna name URLs here, you know it when you see it) and no one can make political jokes without a punch-up occuring.

then Cryptocurrency Might Keep the World Spinning.

For cryptocoins to serve, we must develop their economy across the following areas, in respect to the problems above:

1) secure, decentralized and anonymous markets, like Dark Market or  BitWasp, hosted in the deep web below the radar and beyond the reach of censors,
2) sound cryptographic payment, verification, reputation-maintenance, communication and other associated, Bitcoin-payable services with worldwide reach,
3) a point we all agree on: increase the value of Bitcoin such that it can play in the big leagues. If it comes down to “pay me within 24 hours to offset your default, you splendid son of a bitch, or I push this damn launch button!” then gold is probably too slow and $5.6bn in BTC is probably too little. The film 13 Days is instructive here if you’re unfamiliar with the history of the Cuban Missile Crisis.
4) more dialogue, international conferences, general contact between Bitcoin community members who may find themselves nominally enemies by geographic accident of birth,
5) bonus point, smash the first idiot to suggest black-listing, reversing or seizing coins held in “enemy” wallets. The only enemy of Bitcoin is centralized control.

People and Bitcoin

Those of us who see past national media biases, which is hopefully to say most thinking people on the internet who can parse foreign news, should find the logic in peace. The more advanced the war technology, the higher the risk of annihilation, whether individual, national or planetary annihilation.

Perhaps America will dial back their military, economic and surveillance empire gracefully, rather than meddling abroad to preserve it. And perhaps Russia will restrain their burgeoning borders, pursue greater transparency and stop threatening Europe with energy embargo. Perhaps Europe will get its economic house in order. And perhaps, by international agreement, a halt will be called to the digital arms race before it runs out of control.

Ideal outcomes tend not to occur spontaneously however. Those who desire peace and prosperity should rally around Bitcoin as an apolitical currency. And if the world truly intends to fight over whose system of unpayable debt-creation is best, those of us ahead of the fiat-crash curve must conserve at least certain territories, works, relics and treasures for the aftermath.

Cryptocurrency as Global Reserve Currency

It is only a pipe dream for now. The actions of China and Russia have taken in regards to Bitcoin suggest they may prefer to to base any new system on traditional fiat currencies and commodities only. What can we all do to promote Bitcoin as the foundation upon which to build the world of tomorrow?

Featured image by Shutterstock.

Last modified (UTC): May 1, 2014 15:07

Gordon Hall

Former swing trader of equities and daytrader of futures, out to make it in this crazy crypto world. I'll be doing some chart-reading aka fortune-telling, plus some interviews with crypto developers and miners. And maybe even some cartoons. If you like the cut of my gib, visit my website (goldrhino.tk) and pick up a Ⓑ keychain or Ⓑ leather mousepad.