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‘Bitcoin Can Fix This’ Is Not the Moral of the Story

Outside a Sakura Bitcoin Exchange Inc. store in Tokyo on Feb. 25.

Outside a Sakura Bitcoin Exchange Inc. store in Tokyo on Feb. 25.

Photographer: Soichiro Koriyama/Bloomberg
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Welcome to Bloomberg Crypto, our twice-weekly look at Bitcoin, blockchain and more. If someone forwarded this to you, sign up here. In today’s issue, Michael P. Regan looks at Bitcoin from both sides:

Efforts by the U.S. and its allies to expel Russia from the financial system offer one of the best-ever use cases for cryptocurrencies – and one of the biggest existential threats the asset class has faced.

First the use case: The “Bitcoin fixes this” crowd has long held that crypto is a way to skirt this type of financial “censorship” that has decimated the ruble and put overseas assets at risk for both the Russian government and its wealthy citizens. What’s the existential crisis? It’s the same answer.

The extent to which oligarchs or even run-of-the-mill Russians are rotating into crypto en masse to avoid the financial Armageddon that Vladimir Putin incited — and whether that’s influenced the recent rally — is hard to say. Yet that plotline speaks directly to a preeminent talking point of the crypto faithful. And while the rally may or may not have been directly caused by an influx of Russian money, traders front-running that potential scenario certainly played a huge role.

That’s a big public-relations problem either way. And the warm-and-fuzzy stories about Ukraine soliciting crypto donations aren’t enough to countervail it. In fact, they could make it worse. Imagine if instead it was the Taliban or Hezbollah making headlines for doing the same.