Another reason bitcoin will succeed: US to target Putin's $40 billion stash

[Peter R]

Well probably above my pay grade too, but I'll give my 2 cents anyway as I always do, lol.

SWIFT is mostly just a protocol to help banks find other bank's identities and format payment orders, it is not needed when big money is involved because the central banks have relationships with and can talk directly to other central banks.  If US sanctions Russia, I think not being able to use SWIFT codes would be the least of Putin's problems.  

Say a bank in London wires $100 million to a Russian bank.  And then the Russian bank wires $100 million to a Swiss bank.  How does each bank confirm that the "wire" was real?  Is there some way to confirm each wire with the Fed?  Or do they just have some trust system?  Can a bank wire the same money to two different banks?  Who checks for double spends?  I suppose the underlying asset is a claim on several pieces of paper, but no paper actually moves, correct?

The more I learn the less I know...

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[jonald_fyookball]

Well probably above my pay grade too, but I'll give my 2 cents anyway as I always do, lol.

SWIFT is mostly just a protocol to help banks find other bank's identities and format payment orders, it is not needed when big money is involved because the central banks have relationships with and can talk directly to other central banks.  If US sanctions Russia, I think not being able to use SWIFT codes would be the least of Putin's problems.  

Say a bank in London wires $100 million to a Russian bank.  And then the Russian bank wires $100 million to a Swiss bank.  How does each bank confirm that the "wire" was real?  Is there some way to confirm each wire with the Fed?  Or do they just have some trust system?  Can a bank wire the same money to two different banks?  Who checks for double spends?  I suppose the underlying asset is a claim on several pieces of paper, but no paper actually moves, correct?

The more I learn the less I know...

Haha, great question and I am far from an expert.

My understanding is that there are various clearing houses that manage the balance sheets between banks, and those clearing houses are in turn accountable to the central bank of their respective countries.

[Peter R]

Haha, great question and I am far from an expert.

My understanding is that there are various clearing houses that manage the balance sheets between banks, and those clearing houses are in turn accountable to the central bank of their respective countries.

Thanks Jonald, that's my understanding too.  But I don't have a good handle on exactly who those clearing houses are or how they operate (I thought the big clearing house was SWIFT but I really don't know).  So I guess if the US knows that Putin has say $2 billion in Bank X, then with sufficient influence they could tell the clearing houses not to "clear" certain funds, or cut off Bank X completely. Why not? 

[bryant.coleman]

That is so not true.  Russia would not have ever bailed out for more than what was already done.  Russia is known for writing off uncollectable debt but not for actual giving out billions to overseas private banks.  

From what I've heard Russia offered billions of $$$ to Cyprus for having a naval base in the island. The Cypriot politicians were worried that if they did so, then they'll be kicked out of the Euro Zone. So instead, they stole the money from their citizens' bank accounts.

[jonald_fyookball]

Haha, great question and I am far from an expert.

My understanding is that there are various clearing houses that manage the balance sheets between banks, and those clearing houses are in turn accountable to the central bank of their respective countries.

Thanks Jonald, that's my understanding too.  But I don't have a good handle on exactly who those clearing houses are or how they operate (I thought the big clearing house was SWIFT but I really don't know).  So I guess if the US knows that Putin has say $2 billion in Bank X, then with sufficient influence they could tell the clearing houses not to "clear" certain funds, or cut off Bank X completely. Why not? 

Yeah it's funny how "no one" really knows how it all works.  Even the people at the local bank branch who work for the bank don't know.  I'm sure it could be easily researched with all the info that's online today, but isn't it funny how uneducated we are about the global banking system that we all have historically put our trust in ?

[OROBTC]

...

Great thread, Peter R, thanks for starting it.  Many great comments too (Melbustus, smooth, jonald_).

If Putin has over, say, $5 billion in net liquid assets, then he would qualify as a "Giant" (defiinition of which I will leave for another time).  Giants think differently than we mortals do.

"Three gets you five" that if Putin DOES have $5 billion or more (who really knows) then he would likely be smart enough to be diversified to some degree.  He would already have some decent amount socked away in different venues and in non-correlated assets (at least to some degree).  Bitcoin would be a suitable place for perhaps 1% of Putin's purported wealth.

I am some four orders of magnitude less wealthy than Mr. Putin *may* be.  Yet I have 1% in BTC, some 11% in gold and some invested in our bearing import business way down there in Peru.  In the spirit of one comment above:

Diversification, fishez!

[twiifm]

It depends if they are branches of the same bank or different banks.  

Each country have their own clearing and settlement systems like CHIPS and Fedwire in US

SWIFT isnt a clearing house.  Its a network so the wire goes to the correct recipient

If Putin has an account in US bank and he commits some kind of fraud then theoretically his account could be frozen.

Kim Dotcom had his account frozen in New Zealand from FBI raid.  But Putin is president of Russia so I doubt the US could get anywhere close without a war breaking out

[Beliathon]

Ok if I bought in a few months ago at 800 - 900 USD I would now be at a 50% loss. Is that a store of value? No, it's not.

Nope, that's uhh, not how that works at all, actually. You should probably learn what the words mean before you attempt to use them in an internet debate. Jus' sayin'.

Sometimes I feel like I'm in an episode of a bad reality TV show: "BITCOIN FORUMS: A CLASH OF STANDARD DEVIATIONS ALONG THE BELL CURVE."

[Peter R]

Yeah it's funny how "no one" really knows how it all works.  Even the people at the local bank branch who work for the bank don't know.  I'm sure it could be easily researched with all the info that's online today, but isn't it funny how uneducated we are about the global banking system that we all have historically put our trust in ?

Lol, and then people claim that bitcoin will fail because it is too confusing.  Is it possible to invent a simpler global monetary system than bitcoin?

[smooth]

Lol, and then people claim that bitcoin will fail because it is too confusing.  Is it possible to invent a simpler global monetary system than bitcoin?

It may not be. Globally coordinating anything is hard.

[Peter R]

Lol, and then people claim that bitcoin will fail because it is too confusing.  Is it possible to invent a simpler global monetary system than bitcoin?

It may not be. Globally coordinating anything is hard.

Yes.  Good point Smooth.  Bitcoin is a simple and transparent p2p electronic cash system but we don't yet know if it can become a global monetary system. 

[SolarGalaxa]

Seriously? The US does anything it wants without repercussions. Instead of targeting foreigners (whoever they may be), uh, maybe legalize and tax marijuana and gambling and watch the billions roll in?

[bryant.coleman]

Seriously? The US does anything it wants without repercussions. Instead of targeting foreigners (whoever they may be), uh, maybe legalize and tax marijuana and gambling and watch the billions roll in?

The current round of sanctions against Russia are completely toothless. Almost none of the Russian politicians have their bank accounts in the US. IF they indeed have the same, then they must be stupid beyond belief.

[Lauda]

i doubt he understands BTC or cares about it.

I think that he has better things to do than to read about Bitcoin, for now.
His advisers should have told him about the great advantages of it though.

[Littleshop]

That is so not true.  Russia would not have ever bailed out for more than what was already done.  Russia is known for writing off uncollectable debt but not for actual giving out billions to overseas private banks.  

From what I've heard Russia offered billions of $$$ to Cyprus for having a naval base in the island. The Cypriot politicians were worried that if they did so, then they'll be kicked out of the Euro Zone. So instead, they stole the money from their citizens' bank accounts.

The loss was huge.  They got money from Europe ( more billions ) and still had to haircut their own citizens.

[bryant.coleman]

The loss was huge.  They got money from Europe ( more billions ) and still had to haircut their own citizens.

They didn't got any monetary grants from Europe. All the EU did was to re-structure their debts, i.e to transfer the debts to European banks with more flexible terms. On the other hand, Russia was offering them grants.

[R2Pleasent]

Bitcoin could be useful in this situation, but not for the whole $40B.  Putin could put $2-3 Billion into Bitcoin for safety.  Any more than that provides rapidly diminishing returns on all fronts:

- Price to acquire Bitcoin will become far too high
- Exposure to a highly volatile asset is not acceptable on such a large sum; Bitcoin could lose most of its value for a variety of reasons
- Bitcoin is vulnerable to an attack by government if there is enough incentive

The first two points are extremely obvious.  The last one, not so much.  But realistically, if Putin injected $40B into BTC, it would make him by far the largest stakeholder in the currency.  With no investment into hashing power and securing the network, the US government could overtake the network at a fraction of his investment and demolish the system.

Putin would instead be more advised to put $2-3B into Bitcoin, $500M into Litecoin, and spend $500M on mining hardware (spread out through ~2 years).  This would allow him to invest up to $5B into the system effectively. 

Of course, someone of Putin's status likely has many other ways to store $40B+.  If he believes the Swiss banks will work against him, he should retrieve his money ASAP and find a more secure place to invest.

[Lauda]

Of course, someone of Putin's status likely has many other ways to store $40B+.  If he believes the Swiss banks will work against him, he should retrieve his money ASAP and find a more secure place to invest.

What happens if he nukes those banks in return? 

[vqp]

- Better ideas?

Of course you have to buy them off-exchanges. Ask Snowden, he might know a few bitcoin kings.

[vqp]

Putin is probably a bad example.  Putin has no problems with corrupt governments seizing private wealth ... as long as it is the corrupt private wealth seizing government he controls.  For the rich who don't control nation states the risk is more real.

In the end it turns out that AML laws are good for bitcoin. At least for its price.