Montenegro, a country of just 650,000, is unfamiliar to many Britons. Yet it’s an obvious choice for get-rich-quick and money-laundering schemes. I was once driven along the casino-studded Adriatic coastline by a former Montenegrin MP on his way to do penance at a monastery for his involvement in unspecified acts of immorality: he made no bones about describing his country, one of Europe’s poorest, as a “narco-state”. Since gaining independence from Serbia in 2006, the country has similarly been designated a “mafia state” and the “weak underbelly” of Europe, a loosely-policed entrepôt where luxury yachts ply the same coastline as smuggled cigarettes and shipments of cocaine stuffed in banana boxes.

The Balkans have long held a broader political fascination for the rising global Right. This relationship dates to the Nineties, when the region was wracked by what the radical Right perceived as civilizational clashes between Christians and Muslims. Today, a more populist Right is seeking to foster relationships across these sectarian divides, linking regional governments into a truly globalized network of crypto-fueled authoritarian strongmen.

Posh George himself moved to Montenegro after his release from US federal prison, having served eight months on major money-laundering charges. He was already the UKIP deputy treasurer after his arrest on his way back from attending the 2016 Republican National Convention alongside Farage, where the then-UKIP chief had spoken in support of Donald Trump. As we now know, Cottrell went on to funnel hundreds of thousands of pounds in donations and undeclared benefits to the man he calls “Daddy”.

Meanwhile, Posh George was also putting down roots on the Adriatic coast. As excellent investigative reporting has shown, Cottrell used his move to Montenegro to establish a network of companies and crypto projects registered in Tivat, a luxury holiday destination where super-yachts tower over terracotta houses along the Bay of Kotor. What’s more, Cottrell is only one of a number of Reform-linked figures to have links to Montenegro. According to the same investigation, Tivat hosts businesses belonging not only to Christopher Harborne — a crypto billionaire and source of a controversial £5 million ‘gift’ to Farage — but also several key figures in Farage’s former Brexit Party: Gawain Towler, Mehrtash A’zami, and Samee Bhatti.

More from this author

The European village colonised by China

By Matt Broomfield

Though the issue is domestically contentious, successive Montenegrin administrations — both anti- and pro-EU — have sought to establish their country as a crypto haven, attracting figures such as the founder of leading crypto-currency Ethereum and the man behind a $40 billion ‘crypto crash’. Crypto also has a wide base of appeal throughout the Western Balkans, a region known for low trust in traditional finance, high bank fees, and endemic money-laundering. I’ve even met locals dreaming of establishing a crypto-fueled libertarian micro-nation in unclaimed ‘terra nullia’ left behind as the region was carved up following the collapse of Yugoslavia, an unrealized dream which speaks to the ideological linkage between crypto and the radical neo-Right.

There’s an obvious parallel to be drawn here with Trump’s relationship to Nayib Bukele, the El Salvadorian ruler who sought to turn the Central American country into a Bitcoin hub — while cracking down on domestic opposition and housing people deported from Trump’s US. It’s possible to imagine a similar relationship developing between pro-crypto Montenegrin premier Milojko Spajić and a future Farage-run Britain, with Montenegro perhaps offering to host deported asylum-seekers after the pattern of other Balkan countries seeking closer ties with their European partners. After all, Cottrell and his associates have been accused of illegally lending support to Spajić’s electoral campaign by providing political campaigning and strategy advice, an accusation he firmly denies.

Yet the British and global Right’s interest in the Balkans dates back beyond the crypto boom. With the collapse of the multi-ethnic Yugoslav federation, local strongmen colluded with foreign backers in both East and West to establish a fragmented mosaic of half-a-dozen ethnostates. These wars came to define the modern term “ethnic cleansing”, and culminated in the massacre of Muslim Bosniaks by ethnic Serbs at Srebrenica, Europe’s worst mass killing since the Second World War.

The Muslim Bosniak forces became a focal point for global Islamist networks, as thousands of mujahideen flocked to the fight and linked up with networks that would later bring militants from around the world to join other holy wars in Iraq and Syria. On the other side of the line, institutional and radical Right-wing figures back their Christian opponents across Croatia, Serbia, Montenegro and Bosnia, similarly establishing networks that would underpin a generation of hard-Right militancy. One good example is John Kennedy, a Tory-turned-Brexit Party candidate who developed close links with Radovan Karadzic, the Bosnian Serb politician convicted of genocide and crimes against humanity. Kennedy became a familiar face on TV, enthusiastically lobbying against the Muslim cause and disseminating what Bosnia’s de facto governor Paddy Ashdown frankly termed “bullshit”.

Though the days of open warfare are over, the fringe Right continues to view the Balkans as a training-ground and ideological frontline between Christendom and the Muslim hordes beyond. Jim Dowson, Britain’s “most influential” far-Right activist, has been implicated in providing financial, practical and media support to anti-Muslim groups in Serbia, the region’s largest Christian nation and which retains close ties to its smaller Montenegrin cousin. While the far-Right uses Serbian nationalism as a vehicle for its fantasies of race war, the populist Right movement developed more substantial links with neighboring Hungary under Viktor Orbán, on the basis of similar narratives of civilizational struggle at the frontiers of Christian Europe.

Not that the situation is so simple as a binary split between evil, Christian, Right-nationalist countries on the one hand, and liberal, pro-Western Muslim nations on the other. Rather, the region remains a battleground, one where Putin’s Russia and the European Union compete for influence, as when Russian intelligence officers allegedly attempted to carry out a pro-Moscow coup in Montenegro back in 2016. Canny local politicians profit from this fragile peace, keeping inter-ethnic tensions alive while presenting themselves as the only figures tough enough to keep the region’s criminality, ethnic conflicts and illegal migration under control — a phenomenon known as “stabilitocracy”.

More from this author

How ravers harmonised Yugoslavia

By Matt Broomfield

These figures can style themselves as nationalists or socialists, and be pro- or anti-Western, or more often a complex combination of the two. Montenegro is a case in point. Spajić’s centrist Europe Now! Movement (PES) heads an exceptionally broad coalition encompassing both pro-European and pro-Russian parties, even as it seeks to push ahead long-stalled EU accession processes while retaining his country’s historically close ties with Serbia, long seen as the bête noire of Brussels liberalism. And it’s this very pro-European party which is allegedly being backed not just by Cottrell, but also a number of other figures with links to the Brexit Party, with figures like Towler and Chris Bruni-Lowe allegedly devising PES’s electoral slogan and offering other advice.

The same seemingly contradictory dynamics are at play throughout the region. For example, another political controversy is boiling in traditionally pro-Western Albania, where the government has greenlit a Trump and Jared Kushner-backed mega-development set to concrete over a nature reserve, sparking the country’s largest protest movement for decades. Yet Kushner’s Affinity Partners firm also backed an equally controversial development in the Serbian capital Belgrade: in that case, building a luxury hotel on a site memorializing Nato attacks on the city. Here, then, are two governments at ideological and political loggerheads — yet happy to establish relationships with the global Right. In both cases, too, the powers-that-be were met with fierce domestic opposition, with locals tired of being shunted aside to make room for the mega-rich global Right.

The migration factor is also telling here. Farage has clashed with Albanian premier Edi Rama over illegal migration from the impoverished, Muslim-majority country, with the latter accusing Farage of touting false statistics over Albanian criminals in the UK and bizarrely sharing an AI-generated image of the two men wrapped in their national flags and sipping wine on an Albanian beach. Yet Rama has also colluded with Giorgia Meloni to tout his country as a potential holding pen for migrants deported from Italy. Forget Farage: even Keir Starmer sought similar arrangements, hoping to outsource Britain’s deportation centers to Albania, Serbia or Kosovo. At any rate, regional ethnic and political divides don’t neatly map onto global divisions. Rather, self-serving politicians of all stripes are united in their pursuit of lucrative relationships with the rising global Right.

In another light, then, the Right’s vision for Britain might offer a distorted reflection of the long-term prospects for Montenegro and its fellow Balkan nations. Like Montenegro, Britain will remain practically reliant on trade and migration flows with Europe to survive, even as it engages in its own hostile tussles with Brussels. But elites in both countries, each in their way at the edge of Europe, will also seek new relationships with the crypto-funded, globalized Right. Tightly-patrolled borders will combine with unregulated investment opportunities, as luxury developments jostle for space with offshore migration detention centers. From the Adriatic to Clacton-on-Sea, an international coterie of flashy Right-wingers will grow richer by the day, without offering local populations any substantial return on their promises of an alternative European order.

Even if the crash wiped out only a vocal and desperate minority of leveraged retail traders, it revealed how dependent many Americans, especially young men, are on various forms of gambling for income. Other symptoms of this dynamic included the “Liberation Day” mini-crash in April and the Gamestop stock craze in 2021. The risks that retail traders are taking seem more and more dramatic; a few make millions and post their winnings on Reddit; thousands seek to emulate these gains and get wiped out.

The economy of the 2020s is marked by a nervous, Zyn’d up desperation. The emergence of prediction betting markets like Polymarket, Kalshi, and Robinhood, moreover, suggests that an entirely novel economic system — the casino economy — has emerged from the information economy, the same way the information economy emerged from the midcentury industrial economy. 

Platforms like DraftKings, Robinhood, or Kalshi clearly incentivize us to engage in gambling behavior. And an extremely fragile labor market and future for labor means gambling to survive is increasingly necessary. The crypto crash illuminated, but did not create this reality; gambling (like OnlyFans, to cite another adjacent phenomenon) happens in proportion to a decay in dependable, salaried wage labor.

More from this author

The Millennial virtue economy is dead

By Matthew Gasda

We are pushed and pulled into the casino economy. This is an enormously complex phenomenon, but it’s worth trying to understand why this is happening and what the ramifications are.

One factor is that the information economy — sometimes known as the economy of bullshit jobs or email jobs — de-conditioned millions of college-educated Americans to tangible toil, as technical or laboring jobs were shipped overseas or taken by cheap migrant labor at home. These shifts, determined by Wall Street, the cheap-labor lobby, and neoliberals in both major parties, were of immense public consequence; yet the public had little input into them. Between 2008 and 2023, the real economy shrank. Young people entering the labor market either managed to secure email jobs (IT, management, human resources, and the like) or fell into an abyss of service-sector precarity; many straddled both sectors, serving as adjunct philosophy teachers by day and as baristas by night. 

The Obama economy’s rebound after 2008 was partly driven by the lottery-like dynamics of NGO jobs and tech jobs — by private and public email jobs. Getting an email job at a startup that succeeded could mean being set for life, while the runners-up would remain economically insecure. These jobs were also ideologically aligned, meant for and granted to so-called coastal elites with the requisite progressive views. This was the economy of New York, LA, DC, and Seattle (the heartlands were buoyed by natural gas, but those jobs also came under attack from the green agenda).

The problem with the Obama-era version of the information economy was that the products minted by NGOs and tech companies and advertising firms didn’t help us do anything — didn’t improve our quality of life. NGOs too often took up niche causes (while laundering their donors’ money). Tech companies visibly eroded quality of life (addictive social feeds, for example, mean going to restaurants where people at the same table scarcely look at each other, let alone, you know, talk). Private equity and hedge funds asset-stripped the real economy, piling debt atop debt to buy up legacy firms, refusing to invest in them, and thus dramatically boosting the likelihood of bankruptcy.

Getting an email job in 2011 was like winning the lottery (especially when those jobs came at startups that vested equity in the company); but the “good” jobs that Millennials found or created in the early Obama era were largely fake in the sense that they what they “produced” was bad for everyone who didn’t work in tech, finance, or advertising. These jobs contributed to the erosion of community life, and detracted from the well-being of Americans at large, and so there was never growing prosperity, or — to borrow the buzzword du jour — collective “abundance.”

The Millennials who were doing well in the Obama economy were doing so at the expense of many  others who weren’t. The product manager who made Facebook more addictive enriched himself at a cost to its users. NGOs that pushed ideological propaganda into school districts or hospitals or the arts achieved narrow victories for themselves, but inflamed social tension, disempowered parties and other mass-membership organizations, and eroded the quality of discourse. 

This economy was value-negative, and its economic benefits, what there were of them, were not well-distributed geographically or across class lines. It was an economy of gross inequality. It now appears to be giving way to something else. Between 2009 and 2019, the top 1% of US households captured roughly two-thirds of all wealth gains; median household wealth, by contrast, barely returned to pre-recession levels. During the same period, private-equity assets under management mushroomed to more than $5 trillion, up from about $1 trillion, and tech giants became Leviathans.

As the email economy falters, and as email jobs are either cut in Washington by a populist Trump administration or replaced by AI, elite laptop-class and credentialed coastal professionals are still habituated to expecting a lot for not a lot of work. That’s where the gambling mindset comes in. Stated bluntly, whether you got into the email job economy and are now feeling precarious, or whether you, like myself, never made it in, you have incentive to gamble.

Yet we have neither the skill nor the taste for the daily, dependable, reliable labor of our grandfathers and grandmothers. The insignia of the information economy — bloated degrees, bloated grades, bloated accomplishments, ideological hypothyroidism — are increasingly useless, and probably should be useless.

The casino economy stands at the threshold of the information economy and whatever comes next. What’s less clear is whether it’s transitional or semi-permanent. It may define the whole next era. Americans have some agency yet in this historical unfolding.

More From This Author

Beware San Fran’s rationalist cult

By Matthew Gasda

While the long-term success of the Trump administration’s economic agenda is far from guaranteed, there’s a refreshing long-termism in the integrated platform of tariffs, corporate reinvestment, and public stakes in private companies — especially companies related to national security, chips, heavy metals, aerospace, and defense. Reduced dependence on migrant labor, which suppresses wages on the lower rungs, would also have long-term benefits. The Trump administration would like to get America back to making things, and for those things to be made by Americans. (On the other hand, Trump’s embrace of crypto and rampant speculation provides reason to be skeptical. There’s a worrisome, even loathsome, enthusiasm for vapor over material abundance.)

And the revitalization agenda is somewhat bipartisan. The most salutary aspect of both parties’ economic ideals is connected to re-embracing the real, rather than the informational, fake product and fake productivity. The general popularity of economic visions predicated on material, street-level reality is encouraging (in contrast to the 2010’s emphasis on ideological and digital “progress”).

At the same time, both parties and politicians across the spectrum are speculators themselves, trading inside information for massive stock gains. (Members of Congress consistently outperform the market by 6% to 12% annually). The casino economy has also been casino politics for a long time.

As for me, I buy dividend stocks, having gotten burned by day trading in 2021. Occasionally I’m tempted into losing money on a football or basketball game. I really enjoy my weekly poker games and the friends I’ve made playing poker. But what I’d like is to not be quite as excited as I am when I can buy groceries with my poker winnings, and for my friends to not be worried about the price of Etherium as it drops in real time during our game. I’d like gambling to be fun (again).

Stablecoins are the bastard child of parents seemingly at permanent odds with each other: the libertarian crypto community and statist dollar worshippers. Built on the blockchain technology that was meant to dismantle the financial oligarchy (Wall Street and the Fed), stablecoins are nevertheless fastened by a 1:1 exchange rate to that same oligarchy’s greatest totem: the US dollar. The result is a purportedly apolitical money joined at the hip with the most politically dominant form of money.

Stablecoins were conceived as the best of both worlds. While devoid of Bitcoin’s hideous volatility, they nonetheless preserved the freedom to transact anonymously and globally — unseen by any government. Setting aside their utility for mafia types, who naturally crave any means of payment that lubricates their trade, stablecoins have been a godsend for people in countries with fragile monetary systems, especially in Africa. Besides providing those without a bank with ready access to a proxy for the American dollar, stablecoins offer a way to wire money abroad that is immune to US sanctions and more reliable than rickety inter-bank messaging systems (e.g. SWIFT).

In short, for as long as governments ignored stablecoins, they did considerable good and could not do much harm. However, now that the Trump administration is weaponizing them for its own purposes, their potential for serious damage has risen exponentially. The combination of two executive orders that President Trump issued (one on 23 January 2025 and another on 6 March 2025) and now the Genius Act is turning stablecoins into a massive time bomb deep in the foundations of the global economy.

Today, the dollar value of circulating stablecoins is around $250 billion. For that sum to be backed with sufficient reserves, it is estimated that last year issuers purchased $40 billion of US Treasury bills, more than any foreign buyer of Treasuries during 2024. In the same year, the stablecoin issuer Tether alone reported annual pre-tax profits of $13 billion — not bad for an offshore company employing around 100 people.

As for the number of crypto wallets with stablecoins, last year there was a jump from 27 million to 46 million while transactions climbed 84%, from $752 billion to $409 billion. Already, stablecoins account for around 80% of all crypto transactions.

Such rapid growth could only encourage the very financial establishment that crypto was originally meant to disrupt. Behemoths like Visa and Stripe are jumping on the bandwagon, and Big Tech is set to follow, seeking revenge for how Wall Street elbowed it out of payment systems. Even Uber, eager to keep more money currently seeping from its ride-hailing platform to the financiers, is developing a fully-owned cross-border stablecoin.

Well before the Trump administration had stepped into the fray to boost them with the Genius Act, Standard Chartered estimated that stablecoins in circulation would increase eight-fold, topping $2 trillion by 2028. The question then is why are Donald Trump, JD Vance and their MAGA brethren hellbent on boosting stablecoins further?

Besides the obvious self-enrichment motive, the more interesting explanation is that stablecoins fit in nicely with the Trump administration’s goal of shrinking global trade imbalances to “Make America Great Again”. Nothing motivates these people more than the idea that what is good for their bank account is good for America.

Team Trump has made its intentions clear: to devalue the dollar and shrink America’s trade deficit, while preserving its dominance by using the threat of tariffs. Stablecoins have a key role in this plan. Suppose, for instance, Japan were to be bullied into using a considerable portion of its $1.2 trillion holdings to buy dollar-denominated stablecoins. The dollar’s aggregate supply would rise, devaluing the dollar. The stablecoin issuers would use the dollars it receives to buy Treasury bills, thus reducing the US government’s borrowing costs and, in the process, bolstering dollar supremacy. In the words of JD Vance, a greater stablecoin uptake will be “a force multiplier of our economic might”.

But stablecoins pose systemic risks that Team Trump would be wise to not ignore. Stablecoin issuers stand to profit from issuing more tokens than the dollars they collect or from purchasing relatively illiquid (but higher interest rate yielding) securities. When stablecoins were small fry (e.g., when in 2021 New York regulators fined Tether $21 million for undisclosed irregularities regarding its reserves), the threat of dodgy reserves was too small to lose much sleep over. However, as stablecoins exceed the $2 trillion mark, the risks could become greater than those posed by subprime mortgages in 2007.

More from this author

Why the centre will not hold

By Yanis Varoufakis

As dollars migrate from US domestic bank accounts to stablecoins, demand for Treasury bills rises and their yields fall. Banks must raise their interest rates to stem this outflow while the Treasury must issue more Treasury bills to satiate the greater demand for them. A wedge suddenly appears between different types of interest rates: bank and long-term Treasuries’ rates rise while short-term Treasury bill rates fall causing the so-called yield curve to become steeper — a sure sign of financial instability.

In 2023, Circle — the issuer of USDC, the second largest stablecoin — had entrusted $3.3 billion of its reserves to the Silicon Valley Bank (SVB). When the latter tanked, a run on USDC began severing its dollar peg. Had the Fed not stepped in to bail out SVB, Circle would have been toast. That little incident now seems like a walk in the park given the US Treasury’s prediction that, in the new climate shaped by the Trump administration’s crypto peans, and the Genius Act, $6.6 trillion of US bank deposits are in the process of migrating into stablecoins.

Wall Street is keen to use blockchain-based technologies for speeding up, securing and reducing the cost of trading securities — to disrupt the traditional rickety system of trading securities in the same way that stablecoins are disrupting SWIFT. But, to shift the trading of shares, bonds, derivatives and assorted exotic financial contracts onto a blockchain, the contracts and the tokens must be inserted into the same blockchain. This means that an arms race is now on to determine which dollar-backed stablecoin dominates the securities’ trades. Once the answer is in, its usage is bound to go through the roof. But the moment the private company that issues this stablecoin gets into hot water, the entire stock market along with the $29 trillion Treasuries market is in peril.

What happens if a stablecoin issued outside the United States crashes? Non-US institutions, including European ones, lack access to Fed rescue mechanisms. Will the Trump administration offer them the Fed swap lines that kept European banks alive in 2008? It is doubtful. Thus, dollar-backed stablecoins issued in Europe, Asia, Africa or Latin America risk exporting financial fragility globally. Even the European Central Bank is panicking at the prospect of having to find dollars to bail out European holders of dollar-denominated stablecoins.

Suggested reading

Donald Trump: crypto president

By Frederick Kaufman

In the meantime, developing countries face a trilemma: ban stablecoins (forfeiting its substantial benefits), create sovereign alternatives, or accept deeper dollarization. China, armed with its digital yuan, sensibly opted to ban stablecoins outright, shielding its financial system. Yet its $4.5 trillion in dollar reserves poses a dilemma — dumping them aids Trump’s dollar devaluation, while holding them risks exposure to US-driven volatility. The Brics’ preparedness, nevertheless, contrasts with most economies, trapped between dollar dependence and destabilizing crypto experiments.

And so the Genius Act is hard to fault — if the intention is to maximize the threat of a financial meltdown. Essentially, it weaponizes stablecoins to privatize money and effectively outsource dollar dominance to Trump-friendly tech lords.

Proving their endless inanity, many Democrats supported this legislation, lured by two promises. First, the Act will protect their chums in Wall Street with a preposterous ban on stablecoins that pay interest. Second, the Act will supposedly regulate Trump’s new digital Wild West. How? Issuers of stablecoins worth less than $50 billion will be subject to state regulation, allowing for a thousand lesser stablecoins to bloom across America. As for the systemically significant ones, including issuers domiciled outside the United States (like El Salvador-based Tether), they will be required to submit to an “independent” audit of the quality of their dollar reserve assets.

The Genius Act paves the way to a massive crash. The authors of the bill have not clearly defined how the reserves will be regulated and they have inexcusably neglected the risk of doom loops. But there is a much, much worse aspect of the Act. It emasculates the Federal Reserve by banning it from issuing its own stablecoin, a digital dollar by which to counter the up-and-running digital yuan of the People’s Bank of China. And, deprived of the necessary tools like the equivalent of the Federal Deposit Insurance Corporation, the Fed will be tasked with cleaning up the mess private stablecoin issuers are bound to create.

To err in the world of financial innovation is human. But to cock things up big time all you need is the US government to promote private stablecoins, to cloak them in the legitimacy that a little regulation-lite can provide, to ban the Fed from deploying the same technology, and to deprive it of the means to clean up the inevitable mess. With the Genius Act we are almost there. The time to oppose it, frustrate it, rescind it, is now.

The United States government sensibly stockpiles a number of materials in case of an emergency, including oil, military gear, medical supplies and gold. But what is the point of hoarding cryptocurrencies which lack any intrinsic utility? Especially if you have constrained yourself, as Trump has done, never to sell the crypto you stashed away? The logic of strong-arming the Federal Reserve into creating a crypto stash is one part self-serving bluster, one part trolling, but also one part strategy.

The self-serving bluster part was made painfully obvious as Donald and Melania Trump pocketed tens of millions of dollars from the otherwise pointless meme coins they issued three days before his inauguration. The trolling part was also on display as he signed the executive order. While ceremoniously putting his exuberant signature on the order’s dotted line, he beamed with the grin of a cheeky peasant who, having just broken into the baron’s pristine drawing room, spoils the splendor of its Persian rugs with his muddied boots. That’s how Democrats and mainstream Republicans felt as they watched Trump elevate the cryptocurrencies favored by libertarians, cranks and criminals to the lofty status previously reserved for solid gold and US Treasury bills.

However, amid this cacophony of creepy profiteering, triumph and despair, it is easy to lose sight of the interesting role that Trump’s strategic crypto reserve plays in his broader economic masterplan. And that would be our mistake.

To recast the global economic order in America’s long-term interest, Trump has a two-pronged, seemingly contradictory, strategy: to devalue the dollar while maintaining its global dominance. By boosting US exports (as the dollar becomes cheaper) while pushing down the US government’s borrowing costs (as foreign wealth piles into US long-term debt), the President seeks to increase US hegemony while also bringing back manufacturing to America. Tariffs, in this context, are the country’s chief weapon, pressuring friends and foes to unload their dollar holdings and buy more long-dated bonds (exceeding 10 years).

But what does crypto have to do with any of this? To get a whiff of the answer, take the case of Japanese banks which hold more than $1 trillion, the result of decades of exports to the United States. Trump wants to bully Tokyo into either investing in the US or dumping most of their dollars into the money markets (thus driving the dollar down) while also not converting them into euros or renminbi (which would risk strengthening the reserve status of rival currencies). What could do the trick? How about convincing, or strong-arming, the Japanese to swap their dollars for crypto? That would work, especially if the Federal Reserve dominated the crypto scene. What else could Trump have meant when asserting in this executive order that the US “has not maximized its strategic position as a unique store of value in the global financial system”?

More from this author

Rachel Reeves, the pound shop George Osborne

By Yanis Varoufakis

More intriguingly, four days after the executive order, Trump endorsed stablecoins. In so doing, he added a fascinating new dimension to the idea of forcing non-American institutional investors into moves that serve his economic masterplan.

What are these stablecoins and why are they particularly promising tools for Trump’s twin strategy? Marketed as crypto versions of the dollar, stablecoins such as Tether, USD Coin and Binance are, by design, a contradiction in terms. The whole point of Bitcoin, the first cryptocurrency, was to stick it to the man — to central bankers and their fiat currencies, the dollar chiefly. But stablecoins, which are mainly used for cross-border payments, are dollar-denominated crypto-currencies that offer you the anonymity, versatility and universality of Bitcoin — while also claiming to guarantee full convertibility to the dollar on a one-for-one exchange rate. Indeed, some of the world’s largest banks and financial institutions are keen to issue stablecoins which are popular in emerging markets. Last month, the CEO of Bank of America suggested it might launch its own, following the examples of PayPal, Revolut, Stripe and many others.

But how can stablecoins promise to keep their value tethered to the dollar, and is this promise credible? In theory, this promise can be met if the stablecoin issuer holds, in some vault, one dollar for every token issued. But, of course, holding zero-interest-bearing dollars in a vault would be anathema to any self-respecting financier. So, even if the stablecoin issuer truly owns an equal amount of dollars to the tokens it has issued, it will immediately trade these dollars for some safe, interest-bearing, dollar-denominated asset — like 10-year US Treasury Bills. This way the issuer is true to their word of backstopping their tokens with real bucks while, at the same time, earning interest. It is an arrangement after Donald Trump’s heart and, I believe, at the center of the idea of his strategic crypto reserve.

By setting up a crypto reserve containing dollar-backed stablecoins, the US authorities are signaling to foreign dollar holders that the US government endorses their ownership of these cryptocurrencies. During upcoming negotiations with various governments, with tariffs dangling like the sword of Damocles above their head, the President will drop subtle hints about how pleased he will be if foreign investors buy these stablecoins using their own dollars. If they do buy them, the dollar supply will increase, the dollar exchange rate will dip, no other fiat currency will emerge as a potential suitor to the dollar’s reserve currency status, and dollar-denominated stablecoins will rise in value. As these tokens will now be worth more than a dollar, their issuer will have an incentive to issue more tokens to restore the one-to-one exchange rate with the dollar. In the process, they will buy, with proceeds from the additional tokens they issue and sell, more long-dated US Treasuries to backstop their increased token supply. Bingo! Trump’s twin strategy is fulfilled: the dollar is devalued while demand for long-term US government debt rises, thus pushing down US Treasury yields and his government’s debt servicing costs.

Upon hearing this, deafening alarm bells should sound in our heads. For if this strategy works, and stablecoins become a pillar of American hegemony, Trump will have planted a time bomb within the foundations of the global monetary system. Monetary history is littered with the corpses of schemes guaranteeing the convertibility of some new-fangled currency with a time-honored store of value. The Gold Standard itself was such a scheme, the post-war Bretton Woods system another.

Take the latter as an example, which coincided with capitalism’s Golden Age — the Fifties and Sixties. The idea behind Bretton Woods was that the West’s currencies would be tethered to the dollar with fixed exchange rates. Moreover, the dollar itself would be anchored to gold at a fixed conversion rate of $35 to an ounce of the magic metal. As long as the US remained a surplus economy, exporting to Europe and Japan goods and services of great dollar value than that of its imports, the system worked fine. America’s surplus dollars were sent to Europe and Japan (in the form of loans, aid or direct investments) and then were recycled back to the US with every Boeing jet or Westinghouse refrigerator that European and Japanese customers purchased.

Alas, by the late Sixties, this recycling system broke down irreparably. The US had turned into a deficit economy, flooding Europe and Japan (later China too) with more and more dollars to finance US net imports. Provided that non-Americans were happy to hoard their dollars, there was no problem. But, the more dollars they had, the more skeptical they were that the US government would honor its promise to hand over an ounce of gold to anyone with $35. Indeed, when several “runs” of America’s gold took place, President Nixon tore up the Bretton Woods agreement, ended the dollar’s convertibility to US government gold, and messaged the Europeans in Trumpian style: “the dollar is our currency but it is your problem.”

So, here is the point: if the mighty US Empire, at the height of its world hegemony, could not honor the anchor of the feted postwar financial system, that is the fixed conversion rate, what gives us the confidence to imagine that a private outfit, such as Tether or Binance, can do it sustainably? Nothing! Indeed, logic dictates the opposite because of the structure of the incentives built into Trump’s strategic crypto reserve. Think about it: as more dollars go into stablecoins, US Treasury yields are lowered and the issuers of stablecoins have a stronger incentive to invest in less stable assets. Indeed, they may even risk issuing additional tokens without backing them with additional dollar-denominated safe assets. The more this goes on, the greater the reliance of the US government, and of the global monetary system, on privateers whose incentives are to act less responsibly. Does this classic case of moral hazard remind you of anything? If not, I would recommend watching The Big Short again.

Debanking is when a bank closes an account in order to censor or punish the customer for political or religious views. The banks, in these cases, are typically responding to ideological pressure or to perceived reputational risk. As you might imagine, anger over debanking rapidly merged with concerns shared by crypto companies, which have also contended with access issues to traditional banking. One CEO shared a letter in which the bank Chase said it was closing his company’s account.

The complaints about debanking were echoed and amplified by Donald Trump. His wife, Melania, claims that she herself was debanked. More broadly, the MAGA movement has ample experience of being booted off social media platforms. The matter of tech debanking, therefore, has been rolled into existing MAGA complaints. By this account, the US government has restricted freedom of expression via several coercive means.

In keeping with this view, Trump’s allies have called for a dismantling of financial watchdogs such as the Consumer Financial Protection Bureau (CFPB). “Delete CFPB”, wrote Musk, echoing Andreessen, who blamed debanking woes on the agency. Examine the policy upheavals of the past two months, though, and you will note that such measures will not have the intended effect.

Far from protecting freedom of speech, the new administration has made it easier for financial platforms to kick users off for political expression. Among the red tape it has slashed were some CFPB rules that were designed to protect, of all things, free speech. This should all work out well for Andreessen, who is one of Silicon Valley’s biggest investors in crypto — the sector that, more than almost any other, yearns for looser regulation.

More from this author

The MAGA battle over foreign workers

By Lee Fang

Just as the casual observer loses sight of the magician’s card, many observers missed Andreessen’s sleight of hand. His remarks on the Rogan show convinced those enraged about censorship to support a niche campaign to unwind protections against crypto fraud.

In this way, Andreessen conflated two unrelated issues for his own financial benefit. In a worrying global trend, a wide array of people — Canadian truckers, Brexit supporters and Palestinian activists — have been removed from financial platforms without due process. Unrelatedly, regulators concerned with keeping crypto startups in compliance with banking rules have taken steps to crack down. Some executives involved in the crypto trade have said they have had difficulty using traditional bank accounts simply because they were flagged by the system. The truckers were debanked; the crypto executives were not.

Consider the viewpoint of regulators. On several occasions in recent years, crypto brokerages and emerging cryptocurrencies have imploded overnight and left ordinary customers with nothing. Regulators have also repeatedly accused crypto startups — including those backed by Andreessen — of a variety of alleged financial crimes. These offenses have included the undermining of rules on money laundering, and the violation of sanctions on terrorist groups. It’s not entirely surprising that those entrusted with safeguarding the financial system view these schemes with extreme suspicion.

As free speech has become a battleground for everyday Americans — waged on college campuses, over political correctness in the workplace, and on social media platforms — a simultaneous legal revolution has taken shape. Corporate actors seeking to eviscerate rules and restrictions on business conduct have attempted to conflate commercial action with free expression. In other words, the business elite is piggybacking off the free speech debate for its own ends.

“The business elite is piggybacking off the free speech debate for its own ends.”

This piggybacking has been taking place for decades. Lawyers have poked and prodded, attempting to find new legal maneuvers to classify business behavior as protected speech. In this vein, Southwest and Spirit Airlines have repeatedly litigated to block a regulation that required airlines to display the full price of tickets. Another example comes via the private rating agencies that were responsible for falsely certifying the safety of risky mortgage-backed securities in the lead up to the 2008 financial crisis. In court, the agencies argued that they were simply expressing First Amendment-protected speech, and were thus exempt from fraud lawsuits.

These efforts largely failed in court, but other, similar arguments have begun to prevail increasingly often. In the Supreme Court ruling Sorrell v. IMS Health Inc., Justice Anthony Kennedy struck down laws against health care firms mining and selling patient data to pharmaceutical companies. The patient data laws, Kennedy wrote, violated commercial speech laws and “burdened a form of protected expression.” In similar fashion, Kennedy and his Supreme Court colleagues cited the First Amendment when ruling in 2018 that the imposition of union fees on non-union public sector employees was unconstitutional. The imposition of fees, they said, amounted to coerced financial speech.

Most famously, Kennedy wrote the majority opinion in Citizens United, the 2010 decision that allowed unlimited corporate and independent spending in elections. The court ruling ushered in our current era of engorged Super PACs and dark money spending, all in the name of the First Amendment. The rules that had governed the financing of political campaigns, Kennedy wrote, had unduly restricted “corporate political speech”.

More from this author

Everyone loses in America's misinformation war

By Lee Fang

The flood of challenges continues. The First Amendment is being used to attack corporate regulations, ethics laws and consumer safety rules. Corporate attorneys are attempting to overturn the few existing laws restricting robo-calls and automated texts; interest groups funded by Google and Facebook have claimed that antitrust enforcement would increase censorship and stifle free speech; and state bans on lobbyist gifts to legislators are continually under threat. Lawyers have argued that such gifts are not bribery, but an example of free expression.

The new administration might find that this legal trend threatens some of its most consumer-friendly reforms. Processed food industry lobbyists have threatened to use First Amendment lawsuits to strike down the Food and Drug Administration’s new updated guidelines on what foods can be labeled as “healthy” — a cause that has been championed by Robert F. Kennedy Jr., Trump’s new health secretary. Trump has also promised to minimize pharmaceutical advertisements on television, but this endeavor, too, is likely to face challenge in the courts on the grounds of freedom of expression.

All of this is taking place without society having made much progress on what we should consider genuine freedom of expression. Banks are still free to arbitrarily remove customers, college students continue to face coercion over free speech, and social media platforms retain near-untrammeled power to censor their users.

Corporations, then, have taken an expansive view of the First Amendment in order to remove constraints on their power. But ordinary Americans have been left on the sidelines, as vulnerable as they ever were to government and corporate censorship.

Strangely, 2 November was the exact day, a year earlier, that CoinDesk — the news organisation where I work — had broken the story that precipitated the fall. Ian Allison’s scoop showed that much of the balance sheet propelling FTX (through its hedge fund, Alameda Trading) was composed of a stablecoin token (FTT) that FTX itself had created. In effect, our reporting showed, FTX had been swapping real people’s real money for a coin with little liquidity and no intrinsic value. And, as the trial would reveal, even this balance sheet was a fiction created by Alameda’s chief, Caroline Ellison, to make FTX look healthier than it actually was.

This was fraud, pure and simple. And over the month of the trial, SBF has been turned into the white-collar criminal par excellence, all by the same media that once fêted and foregrounded him as a charming eccentric. But, though his personal foibles have come to dominate coverage, SBF’s downfall has also been seen as a parable for the entire crypto industry. Our original story set off a tailspin of valuations and crypto prices that is only today righting itself, and the fall of FTX hurt crypto’s reputation among the public and regulators — particularly in Washington D.C., which has turned viciously on the industry and its apologists. The jury on Pearl took just three hours to reach its unanimous verdict, and to many the conclusion was peremptorily clear: crypto was and is a scam, just as SBF and FTX were. For the faithful within the crypto industry, this is a terrifying conclusion. Was FTX really representative of the fundamental wrongness of crypto, an industry that literally creates money out of thin air, as SBF had done with FTT? Or, was FTX, in fact, just a story of immature corporate governance, of structural forces that keep allowing boy-wonders like SBF to do terrible things?

I’ve covered the crypto/blockchain/web3 space as a journalist since 2014, and this is far from the first scandal it’s seen. In fact, long before SBF, I thought I’d seen every flavour of exotic financial scam going. The stories behind “BitConnect”, “Onecoin”, “QuadrigaCX”, and “Mt. Gox” are notorious, and the losses staggering. The Onecoin Ponzi scheme, for instance, started in Bulgaria and fleeced victims of $4 billion. The main perpetrator was one Ruja Ignatova — aka the CryptoQueen — who went missing for years after the scam was first discovered in 2017. She is now thought to have been murdered on a yacht by a drug lord, her remains scattered into the Ionian Sea. QuadrigaCX was a mid-size crypto exchange operating in Canada in the mid-2010s, until its founder, Gerald Cotten, died in mysterious circumstances while on a trip to India in 2019. With his death, $145 million in tokens stored on the exchange inexplicably went offline, apparently missing forever.

Covering these and many such stories was fun. The characters were outsized (BitConnect’s Carlos Matos’s speech to an investor crowd in Thailand became an era-defining meme). And the claims they made for themselves were always outlandish, from “you’re going to get rich!” to “we’re going to save the world”. A lot of the journalists covering crypto at the time believed in the underlying technology and the message of decentralisation (that banks, governments and Silicon Valley fundamentally do have too much control over our lives). But we didn’t take the industry overly seriously, because the actors involved were often not serious about following through on their promises. Crypto was an entertaining sideshow to the mainstream events happening in finance and business.

Suggested reading

Welcome to the cashless dystopia

By Rachel O'Dwyer

By the time SBF came along, emerging as a boy-genius during Covid, it seemed like much of the fun-and-games was over. Crypto had grown up. Its leading companies, like Coinbase, had gone public, sanitised of their earlier ideological commitments of banking-the-unbanked and usurping central banks in controlling the money supply. The industry had disciplined advocates in Washington. Its leaders were part of the financial establishment, still on the margins to be sure, but not in the way the cypherpunks — the community of Nineties-era digital anarchists who gave rise to Bitcoin — were outside society. They had believed in utterly breaking the banks following the 2008 financial crisis, not in getting Wall Street’s assent to reshape finance for the digital age.

Then, in November 2022, salacious details about SBF/FTX began to emerge on the back of our story. SBF had been running a “cabal” of former roommates (several of whom, it was speculated, had been involved in a polyamorous tryst) out of a lavish compound in the Bahamas. It had no accounting department or risk manager, despite being a $32 billion company in an infamously risky industry. Still, many aspects of FTX made it a different type of scandal to BitConnect and the rest. SBF’s organisation had been taken seriously by serious people, including the regulators and many high-profile politicians. It had investors from blue-blooded Silicon Valley firms and it presented itself as part of the next wave of crypto development: sober, measured, media-savvy, and politically connected.

BitConnect, Onecoin, QuadrigaCX et al. had never made it onto the front cover of Forbes or Fortune. The founders of these enterprises didn’t appear before Congressional committees, as SBF was wont to do, to argue for the industry’s interests. They never had private meetings with the chairman of the SEC to argue for favourable treatment. They never paid off one third of Congress — almost 200 representatives and senators. They never appeared in primetime ads, and on-stage, with A-listers like seven-time Super Bowl winner Tom Brady, Larry David or President Bill Clinton. And they certainly never paid to rename football and baseball stadiums with their brand. This was a different crowd to the old bad boys of crypto.

Suggested reading

Inside Liberland: Europe's Bitcoin micronation

By Matt Broomfield

SBF’s need for attention from the media and the political class is one reason why he’s now taking such a rap for the industry’s failings. He brought it on himself. SBF, who dressed and acted in a casual way that reporters tended to like, was a media addict who revelled in his “king of crypto” status. He gave out his cell number to anyone who would listen to him, making himself available for comment at odd times, day and night. He never missed an opportunity to make a potentially viral TikTok video or eke out a little more airtime. Even after FTX’s collapse, he was still calling up every reporter he knew to try and press his innocence, even as every defence lawyer told him to stay quiet.

So, when the New York Times said that crypto was on trial in the SBF case, it was not entirely unreasonable (though definitely misleading). He was the face of crypto for a couple of years. But, to many in the industry, SBF’s incarceration proves little, because he was never a true believer. SBF never advocated for true decentralisation, as hardened Bitcoiners do. And, when he was palling around D.C. salons in 2021 and 2022, he was largely speaking for his own company, rather than for the industry as a whole. These people point out that the fraud was committed largely in dollars, rather than crypto, and it could have happened in any industry that’s lightly regulated and supervised. Bernie Madoff, Elizabeth Holmes and the Great Financial Crisis of 2007-8 managed fine without any Bitcoin or stablecoins changing hands.

But SBF really was supposed to be the chosen one who could make crypto safe for everyday users. As new laws and regulators come down in the wake of FTX, SBF may have achieved that goal, but not in the way he intended. Today, the words “crypto” and “Web3” are losing their currency, replaced by a legalistic vocabulary of “digital assets” and “tokenisation”. Intermediaries that hold crypto assets, like exchanges, now have to attest to their reserves, so it’s clear that people like SBF are not making off with people’s money for their own enjoyment. Crypto is less about financial freedom and wild speculation around funny sounding meme-coins (like Dogecoin and Shiba Inu) and more about “real-world assets”, such as treasury bonds and stocks.

Wall Street is gradually incorporating crypto into the wide financial nexus in subtle ways, exerting control over future regulation and controls. The T-shirt wearing Bitcoiners, who gave rise to the industry and made it culturally interesting, are being sidelined in favour of suits and compliance officers. This all makes the industry less fun to cover and less scandalous. But it also probably means that crypto is on safer ground: more trustworthy and predictable, and less volatile. SBF was part of a wave of crypto-sanitisers who aim was to move crypto from the anarchic fringe to the mainstream. His accidental legacy may be to make it more like the rest of finance — safe for grandma and relatively boring.

The idea of setting up an “independent” nation has always been attractive to libertarians, even though a half-century of attempts to establish tax-free idylls have produced no tangible results beyond angering locals and wasting the pocket change of billionaires like Peter Thiel. Partly in response to this, the more artistic tradition of “micronations” has been overtaken by a particular trend of Bitcoin-fuelled ultra-libertarianism, which implies less a release from state repression than a form of anarcho-capitalism. This vision has more in common with Dubai’s brand of free-market authoritarianism — a vision of ultra-rich luxury and labour exploitation — than any true utopian ideal.

Vit Jedlička, a ruddy-cheeked, stout-chested libertarian ideologue and self-styled President of Liberland, is as emphatic as he is energetic. “We are not a micronation, but a nation of 700,000 people, with embassies in 80 nations, and relations with countries like Haiti, Somaliland, and Malawi. We’re serious about getting Liberland set up as a country.” Never one to undersell his project, Jedlička clearly has tremendous fun barrelling around the world promoting Liberland. Nominally based out of this scrap of marshland the size of Gibraltar, but largely operating online, it’s a Web-3 nation: businesses unfettered from regulation, a skeleton state providing only basic protections, and “citizens” issued with voting credits based on the amount of voluntary tax paid.

Never mind that none of those would-be citizens actually live in Liberland — instead there is a handful of activists moored downstream on a houseboat, under the close supervision of the Croatian police. Never mind that its diplomacy is rather more limited than Jedlička suggests, with the citizens of Malawi recently ridiculing their government for getting involved with a nation that is never likely to exist. The President is always ready with a litany of soon-to-be realised projects and promises, hinting at deals and meetings with billionaires and politicians. The crash in the crypto market is a blip; a Liberland houseboat has been torched, but there will be an insurance payout. Every potential threat is recast as proof his project will succeed.

We first meet in a half-finished holiday camp Jedlička has purchased on the Serbian side of the river. And there is a clear tension between this “eco-village” (a “diaspora” site where Liberland’s first “settlers” will train in survival and negotiation skills) and his Serbian supporters’ frustration at the lack of a clear business plan. But, even if its “ambassadors” are paid lobbyists or random Bitcoin enthusiasts, Liberland does have more political reach than other libertarian micronations. This is partly a product of Jedlička’s gregarious personality, which has kept the project alive since it began in 2015. Due to an arcane, post-Yugoslavian boundary dispute, neither Serbia nor Croatia prefer to lay claim to the 7km²  of territory, leaving it — Jedlička says — “terra nullia” for the taking. (The Croatian authorities disagree, tolerating the Liberlanders’ presence on their territory, but denying them access to the contested patch of land.)

More from this author

Is Serbia a pro-Putin outpost?

By Matt Broomfield

But this reach is also thanks to the political moment into which Jedlička announced his project. The conservative Czech politician found a natural home in the heady world of Web-3 technologies, securing capital backing (through cryptocurrency investments) and the means to place Liberland’s constitution on the blockchain in perpetuity. He generated a growing, global interest in his ultra-libertarian vision — resulting in collaborations with big-name architects, the Polkadot cryptocurrency development fund, and a host of global Bitcoin fans, including the Liberian (not Liberlandian) Consul General to Dubai, currently living on a barge just outside the UAE in imitation of Liberland’s ideals.

For Jedlička, these international supporters “understand the economic potential of a truly free zone in the European Union… they like the vision, and want to watch”. He presents it as “combining aspects of the most successful states to date”, bringing together Singapore-style meritocracy, the town-hall democracy of early America, and the low-tax environment of European microstates such as Monaco or Liechtenstein.

In practice, such a system would face immediate issues. As we ride rickety bikes along the course of the Danube, Jedlička says he prefers the “right to set up a lemonade stand in the street over the right to cycle down it naked”, suggesting that the freedom to practice business should trump personal liberties. Yet this approach opens the door to all manner of abuses, since those individuals or businesses able to spend the most money will also be able to determine law and policy, by securing the most voting credits. Already, in Serbia’s Liberland-linked tourist village, a promised wage of €600 a month has proved insufficient to retain the skilled workers needed to complete the camp, leaving it half-finished. The “non-aggression principle” proposed to prevent direct physical harm between Liberland citizens offers no protection of basic rights. There is no health or social care, workplace protections or minimum wage. To the Liberland activists, “welfare state” is a dirty word.

Other liberties would also come under threat. The project has been troubled from the outset by the question of whether free movement of peoples would be allowed, with Liberlanders congregated in the Serbian eco-village mocking the emailed residency applications of confused Middle Easterners who mistake the country for a real polity. While Jedlička generally presents an optimistic, modernising political model, Serbian supporters who drove up from Belgrade to visit their President describe themselves as proud “conspiracy theorists”. And this isn’t libertarian trolling: they cite the Protocols of the Elders of Zion and Ku Klux Klan associate Albert Pike in arguing that the world faces an imminent race war orchestrated by the same Jewish New World Order they allege was behind the Holocaust. Given no-one actually lives in Liberland, Jedlička is free to place his trust in a notional citizens’ veto to prevent abuses of rights. But it remains unclear how a clash between libertarian ideals of free movement and the survivalist, white-nationalist inclinations of many its followers would be avoided.

Jedlička is able to evade these issues through a mixture of blind confidence and the fact that his project exists only on paper — or on blockchain. A fully-fledged Liberland would resemble real-world microstates, in that it would rely on either the continued “mining” of cryptocurrencies or on accommodating international capital as a tax haven. Quoting a sympathetic, Belgrade-based think tank, Jedlička suggests a tax haven on the Danube would bring a GDP boost to neighbouring states.

But other libertarian projects have failed following local opposition: the 1972 “Republic of Minerva”, an attempt to establish a microstate on reclaimed land in the ocean near Tonga, came a cropper when locals decided not to allow rich Westerners to enjoy a tax-free oasis at the expense of their fishing rights. More recently, a “seasteading” project which aimed to establish a floating utopia near Tahiti, initially backed by libertarian billionaire Peter Thiel, met a similar fate, collapsing following angry protests from locals opposing a “megalomaniacal” project with no clear benefit to the local economy.

Recent attempts to establish crypto-friendly communities of expats in Puerto Rico and Central America have also foundered. Notoriously, El Salvador has witnessed a protracted effort by its president, Nayib Bukele, to force locals into using Bitcoin, while attracting the Western crypto elites to free-market resorts intended to serve as Bitcoin playgrounds. The attempted pivot to virtual currency has been met with indifference and protest. Following the recent crypto crash, the nation came close to defaulting on its sovereign debt. Bukele’s Bitcoin roll-out has also gone “hand in hand” with the introduction of a “police state” characterised by widespread arrests, detentions and torture, including the arbitrary arrest of those opposed to the government’s bitcoin policy. Liberland’s nominal finance minister Navid Saberin, a Luxembourger businessman, admits he personally visited El Salvador and found “no-one had anything good to say” about the Bitcoin pivot. Yet he also remains wholly optimistic that Bitcoin will bounce back, restoring his fortunes and justifying Bukele’s efforts.

Jedlička worries that finance journalists dismiss Liberland’s political programme as too utopian. In reality, the opposite is true. If realised, his “vision” would result in a dystopian combination: reliance on foreign capital which creates little benefit for local communities, undergirded by authoritarian excesses in defence of those elite financial interests. The Liberland proposal is not a challenge to the current economic order. It is its fullest expression, stripped of all protections, checks and balances.

Suggested reading

Workers have lost faith in money

By John Rapley

But this vision has its appeal. In the surrounding states, crony capitalism beholden to EU investment has brought few benefits to ordinary people. Liberland’s President is a genuine and infectious believer in personal sovereignty, and it’s little wonder frustrated young people are attracted by his dynamic, untrammelled version of capitalism, as they are by the get-rich-quick crypto promise. And though Jedlička is keen to distance himself from more playful, performance-based micronations, the political model has also been used to register protest against authoritarianism and homogenisation. Protest projects such as Germany’s Free Republic of Wendland or New Zealand’s Independent State of Aramoana stood up against the profit-driven destruction of local communities and environments, with the latter successfully resisting the state-backed imposition of an aluminium smelter. In nearby Slovenia, the Neue Slowenische Kunst (NSK) used provocative appropriations of state insignia to critique state authoritarianism.

Though dismissed by Jedlička, this spirit of protest is inherent to both the micronation concept and the libertarian movement. There is room for a more productive critique of an admittedly exploitative global financial system rigged to benefit certain states, which also recognises the limitations of crypto and the role that tax havens and free-market ideology play within that system. For now, though, we have only Jedlička’s vision of Dubai-on-the-Danube, and its handful of loyal followers.

Bitcoin Beach, with its old shacks and gleaming new hotels, is home to an eclectic mix from El Salvador, the United States and beyond. Its residents include investors and fishermen, YouTubers and surfers, former beauty queens and former mercenaries. It is more than just a beach club; it is a symbolic landmark of an 18-month-old experiment to promote the cryptocurrency in El Salvador, whose economy is otherwise driven by farming, sweatshops and migrant remittances.

Salvador’s Bitcoin project is championed by globe-trotting entrepreneurs, known as “Bitcoiners”, but is also a key policy of President Nayib Bukele, a 41-year-old former marketing executive who has revolutionised politics for San Salvador’s six million inhabitants. Bukele is most famous for his crackdown on gangs, having suspended civil liberties and incarcerated 1% of the population. But while he has taken an authoritarian approach on crime, in Bitcoin he has embraced a flagship of many libertarians — the controversial blockchain system for digital payment transactions created by the pseudonymous Satoshi Nakamoto.

Bitcoin crept onto the world stage in 2008 and gradually rose in value, attracting hundreds of billions of dollars by the late 2010s. Amid various downturns and scandals (most recently the collapse of the FTX exchange), many dismiss the currency, but it still attracts investment and hardened Bitcoiners insist it will eventually replace physical cash. In September 2021, El Salvador became the first country to declare Bitcoin a legal currency, alongside its use of the US dollar. All Salvadorans received the equivalent of $30 if they signed up to the state-approved “Chivo Wallet”, while Bukele spent $100 million from Salvador’s state coffers on the crypto, shortly before it crashed, immediately diminishing this investment to $66 million. Despite this, Bukele announced “volcano bonds” to raise money for a tax-free Bitcoin City near the Conchagua volcano on the Gulf of Fonseca. At the 2021 Latin American Bitcoin and Blockchain Conference in El Salvador, Bukele was introduced with a giant screen displaying an avatar of him in his trademark hipster beard as a flying saucer beamed him down to earth.

For all the fanfare, it’s hard to figure out the mechanics of Bukele’s scheme, such as how Bitcoin City will pay for garbage collection with no tax. It is also unclear what the incentives are, with critics claiming it is really designed to attract money launderers. Like the currency itself, the experiment seems to mean different things to different people, have varying applications (some useful, some shams) and is as much about the image as the product. In short, Bitcoin El Salvador is as cryptic as the virtual money itself.

More from this author

Inside El Salvador's brutal gang crackdown

By Ioan Grillo

Likewise, it’s hard to classify exactly what Bitcoin Beach is. It is not an official district (and is not on Google Maps) but is part of an area called El Zonte. The Californian surfer, businessman and evangelical Christian Michael Peterson is credited with devising the concept in 2019, helping inspire Bukele to launch the currency nationally. Peterson had been visiting El Zonte for over a decade and conducted charity work through a non-profit called Missionsake. The Bitcoin Beach website describes itself as a Salvadoran initiative that Missionsake supports, and the beach as “a sustainable Bitcoin Economic ecosystem… where the majority of people do not have access to bank accounts”. However, while almost all businesses in the area accept the crypto, it’s unclear how many of their transactions use it; one vendor tells me it’s only a tiny amount and he uses those sales for savings.

The project headquarters can be found at Hope House, a white building emblazoned with an orange Bitcoin logo. There, I meet Jorge Valenzuela, a 33-year-old “coordinator” from Zonte. Valenzuela says Bitcoin Beach is registered as an educational and social project which has taught local youths to get a foot in the financial system. But he concedes there are other goals, too. “We can do transactions in Bitcoin and it works. But beyond this there is tourism, economy, new jobs, opportunities, many journalists coming here to see what is going on,” he says. “We have changed the country now. The country of pupusas. The country of waves. The country of Bitcoin. The country of good people. Now nobody is remembering a bad country.”

As successful Bitcoiners have shown, crypto can be promoted not just as a currency or investment but as a lifestyle choice, involving living by the beach, working remotely, and rejecting government interference. Down the road in a gated community, I meet some of those attracted to this newfound libertarian side of Salvador. Nicki and James are a pair of Bitcoiners who moved from New Zealand in early 2022. James was an early adopter of Bitcoin from an entrepreneurial family; Nicki worked in finance. They met during the pandemic as New Zealand’s lockdown restrictions were getting increasingly harsh, especially for the unvaccinated. “They made a two-tier society. You couldn’t go to a café. You couldn’t get your hair cut. You couldn’t do all those things,” Nicki says.

Suggested reading

There's nothing woke about crypto

By Mary Harrington

Then, in November 2021, El Salvador became one of the first countries in the world to remove all Covid travel restrictions. Nicki and James sold up, said goodbye to their families and began a new life by the Pacific, as well as a new YouTube show. Like the few hundred foreign Bitcoiners in the country, they do a mixture of remote work and social media in addition to investing in crypto. As well as saving Bitcoin, they also spend it at the local stores, using apps that can facilitate rapid transactions. “It’s really important for us to utilise it in both ways,” says Nicki. “Eventually, it would be really great to see the fiat system go.” James sees their decision as political: “We literally moved our monetary choices and our time spent to another currency system in another country,” he says. “That’s a really strong vote in our mind.”

The most famous Bitcoiners in the area are Max Keiser and his wife Stacy Herbert, formerly co-hosts of a financial news show on Russia Today. They are considered advisers to Bukele on Bitcoin, a badge that Keiser proudly announces on his Twitter handle to his half a million followers. Their podcast “Orange Pill” applauds Bukele, and discusses Bitcoin in terms laced with near-religious zealotry. “There is always a counterforce for everything in the universe, and Bitcoin is the counterforce to all this: that money-printing; those warmongers; those plunderers,” Herbert said in a recent episode. “Bitcoin cannot be stopped.”

One area where Bitcoin could certainly take off is with remittances, the money migrants send home from their work abroad, mostly in the US. In 2021, migrants wired $7.5 billion to El Salvador, representing more than a quarter of its entire GDP. They often send it in small amounts to their families, and pay high fees using transfer services such as Western Union. Bitcoin, with its blockchain technology, could massively reduce these.

More from this author

Mexico’s cartel corruption on trial

By Ioan Grillo

In the more deprived areas of the capital San Salvador, however, residents seem less enthusiastic. Flogging bananas on a stall in the Margaritas slum, Yamileth Gonzalez, 40, says she received her initial $30 with the Chivo Wallet but hasn’t used it since. “It’s fiddly. A hassle. I prefer cash,” she says, although she is a firm Bukele supporter. Meanwhile, less than 2% of remittances used crypto. The migrants sweating in fields and restaurants seem to lack the patience and trust to turn their earnings into Bitcoin. This isn’t too surprising: many cryptocurrency ATMs in the country appear to be broken. Standing on a street corner in San Salvador, I watch a line of people try to use one, only to walk away empty-handed.

Yet a few streets away, there are signs of El Salvador’s Bitcoin revolution taking shape. Outside Chivo Pets, a government pet hospital that charges in Bitcoin, a trail of dog owners bursts out of the waiting room and onto the street. Here, customers who pay in Bitcoin are charged massively reduced fees — just a few dollars for hundreds of dollars worth of treatment. One queuing dog-owner, Veronica Serrano, tells me she is not a supporter of Bukele but thinks that launching Bitcoin was a popular policy, despite people not using it much. “People like the idea of Bitcoin because it seems modern and futuristic. It seems like we are going forward,” she says.

This strikes me as a key motivation for Bukele, a marketing executive who is very tuned in to the image of his policies. In terms of its PR value, for Bukele, the country’s broken crypto ATMs are a sideshow. As long as places like Bitcoin Beach and Chivo Pets continue to succeed and dominate the headlines, there will always be a victory for him to sell.

Former Afghan President Ashraf Ghani reportedly fled to Dubai after the Taliban takeover of his country in a chopper loaded with hard currency. He joined former Pakistani military ruler Pervez Musharraf, who moved there to avoid charges following the assassination of Benazir Bhutto, and Thailand’s Thaksin Shinawatra, who went into self-imposed exile after he was overthrown in a military coup in 2006.

Yet these men are small fry compared to the global criminal elite who have also moved to the air-conditioned oasis. Irish mobsters the Kinahans left their Spanish hideout for Dubai in 2016, the same year as powerful South African kleptocrats the Gupta brothers. They join Somali pirates and Al Qaeda members in enjoying the Emirate’s bespoke money laundering services. Most recently, the city has been flooded with the villains of the hour: wealthy Russians caught up in sanctions and a tanking economy in need of a safe haven following the invasion of Ukraine.

Dubai, no stranger to patronage networks and opaque systems of governance, is deliberately attracting this money. The state is strongly pushing crypto, and crypto kings have descended on the city — which is beginning to be known as “The Wall Street of crypto”. Today, the Russian elite who have flooded Dubai are largely bringing their money in digital form, rather than in the bank notes of bygone eras.

But there’s no greater appeal for money launderers than bricks and mortar. Dubai offers investor visas for those willing to spend upwards of £1 million on property. With the recent influx of Russian money, property sales increased 45% in April (compared to 2021) and 51% in May. While the sanctions against Russia’s elite have been so biting that Roman Abramovich and his stolen billions are no longer even welcome in London, the original home of blood-soaked wealth, he has been spotted strolling Dubai’s marinas, even docking his superyacht in its harbour. He is not the only Russian kleptocrat said to be shopping for a luxury apartment there.

Suggested reading

The man who lost Afghanistan

By Will Lloyd

For a city that touts its very low crime rate — abuse of blue-collar migrant workers doesn’t count, of course — Dubai now has a dance card that would make Interpol blush. That is, if the agency hadn’t elected Emirati Major General Ahmed Nasser al-Raisi as its president last year. But the city gets away with it, by operating a very simple code for its “colourful” expat community: do your dirty work elsewhere. So long as your enemies aren’t murked on Dubai’s streets, and yachts loaded with cocaine aren’t arriving in the city’s ports, mobsters and tyrants are welcomed with open arms.

The Kinahans, for instance, run a transnational cocaine business and are suspected to be behind some 20 murders in Ireland and Europe. But in Dubai, they have enjoyed the best of what the city has to offer, laundering dirty money into hard assets. Having been deemed “low-risk” by UAE authorities, the Kinahans built a luxury property portfolio and a business front to maintain the ruse that they’re not cons. Ireland and the European Union were frustrated by attempts to catch their man because the UAE does not have an extradition treaty with either.

And yet, the welcome extended to them in Dubai may be cooling. In April, the Emirate agreed to give up the Kinahans and their vast business empire, with extradition to the West appearing likely. Recently, Dubai’s police actually arrested South Africa’s Gupta brothers after Interpol issued a red notice against them.

Why the sudden willingness to give up a few crooks?

Suggested reading

Britain is Putin's playground

By Oliver Bullough

Dubai might be a global tourist and finance destination, but the Emirate is subservient to its big brother Abu Dhabi, capital of the UAE. Not only does the latter have most of the oil — indeed, the seventh-largest proven oil reserves in the world — but it used the profits from that oil to come to Dubai’s rescue during the financial crisis of 2008-09, when the city’s over-leveraged property sector was teetering on the verge of collapse. “Dubai has had to give up control over the foreign affairs, and this includes responding to international sanctions and international police requests,” says Christopher M. Davidson, a British academic of the Gulf. “Abu Dhabi likes to play this role of a good international citizen.”

In the case of the Kinahans and Guptas, Dubai was happy to ignore pressure from the United Kingdom, the European Union and South Africa to hand them over. But when both families were sanctioned by the United States (the Guptas in 2019 for corruption, the Kinahans in 2021 for drug running and money laundering), they became a problem that could no longer be ignored.

As a tightly controlled laissez-faire economy, the UAE embodies all the contradictions of 21st-century hyper-globalisation. Emirati rulers buy their clothes in Paris, surveillance systems in Tel Aviv, and their arms in London, Washington and Moscow. They have a station on China’s Belt and Road initiative, send their troops to stamp out terrorism in India, and abstained from a UN vote condemning Russia’s invasion of Ukraine. With the exception of Iran, the Emirates are friends and business partners with everyone who matters.

However, the free flow of capital and people through its ports is still the American way of doing business, and America is still the umpire: the US dollar still functions as the world’s reserve currency. Being sanctioned by Washington can destroy an economy overnight, and what would Dubai be left with? A glittering airport and skyscrapers aren’t much use when no one will pass through, and the royal family’s legitimacy is built on an ever-growing economy.

Suggested reading

How Russia's elite bought Biarritz

By John Lewis-Stempel

That’s not to say Dubai has zero leverage. “As a major hydrocarbon producer, the United States, Britain, and the European Union see it as playing a vital role in stabilising international energy markets,” Christopher Davidson says. “In the same context, the US — and now France — have allowed Saudi Arabia’s crown prince Mohammed bin Salman to ‘come in from the cold’. In return, they are expecting full Saudi cooperation with regard to oil production.”

Just as Dubai knows its place in a geopolitical hierarchy, it is alert to the hierarchy of crooks it harbours. Clearly, the Kinahans and Guptas are small change compared to some of that Emirate’s other residents — worth sacrificing to appease the United States. But this of course begs the question: why is Dubai still considered the global safe haven for Russian money since crushing sanctions were put in place after the invasion of Ukraine?

For its part, the UAE has said that it wants to remain neutral and that it  does not want to “lump together” all Russians into one category. After all, the nation has the fifth-highest number of billionaires in the world — 117 per million people — and it’s not as if their home nation is agitating for their extradition. In the end, human rights and just wars are abstract concepts, but the language of business — and oil — is one that all sides can understand. Stability means cutting a deal where everyone feels like a winner, and it appears the West will put up with Dubai housing the Russians it will no longer do business with, in order to appease the Emirates’ diverse political and financial interests.

The United States can ask for plenty from the world’s key oil suppliers, but not everything. After Dubai skated through the Great Recession on the mantra that some companies are “too big to fail”, it’s now navigating a fraught geopolitical stage on the time-honoured idea that some people are simply too rich to jail.