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For the last few years of Bitcoin's existence the dominant narrative circulating in this ecosystem has been that of "digital scarcity" and "sound money." While the narrative of censorship-resistant payments has by no means disappeared, in my opinion it has become slowly eclipsed over the last few years by the mantra of "digital gold" and "digital scarcity." I believe this is putting the cart before the horse. Yes, scarcity in a world of constantly inflating currencies is very important, as evidenced by the dynamics of investing in real estate, equities and other types of assets that can outpace inflation in real terms. It becomes a necessity to expose yourself to such assets if you have any sizable amount of wealth, as without doing so means a constant loss of purchasing power. But what is the underlying support for such speculative activity? Utility value. Real estate is valuable because people live in homes, they open businesses, they extract resources. Equities are valuable because either directly through dividends, or indirectly through value appreciation correlated with growth, investors are able to share in the profit of a successful economic endeavor. While there is a speculative component in these markets the underlying value is based on some portion of the market subjectively finding actual utility value. Without that utility value underlying a market, speculation in that market is effectively no different than gambling. So what is Bitcoin's utility value? Censorship-resistant payments.

I think the feedback loop in the relationship between speculation and utility value is generally overlooked or oversimplified in the context of the narrative of Bitcoin. To put it one way, the balance of different narratives is getting lopsided and ignoring the reality of what supports Bitcoin's utility value, censorship-resistant payments. This is the utilitarian basis of speculation in Bitcoin's case. So how does this dynamic play out in geopolitical terms?


Sanctions are one of America's most important tools in coercing compliance with its political demands around the world. This can take many forms, such as diplomatic sanctions where political ties are severed, military sanctions where strategic military strikes or weapons embargoes are enacted, even strangely preventing sports competitions with the sanctioned country. But the most effective and damaging type of sanction is economic. This can take the form of preventing the import/export of specific goods or services, or at the most extreme the complete restriction of all trade or commerce involving the targeted entity. Economic sanctions can be targeted against entire countries (as evidenced by the U.S. restricting all trade with Cuba), sectors of an economy, specific private or state-run companies, and even individuals.

They are used as a tool by individual nations and the United Nations generally as a way to accomplish specific foreign policy goals, or to protect their national security interests (or those of their allies) across the world. Major examples would be the heavy sanctions against Iran in relation to their uranium enrichment projects, Mexico with the prevalence of drug trafficking, and Russia with their actions in Ukraine in the last decade. Each of these instances of sanctions is a direct result of a nation, or entities within that nation's jurisdiction, engaging in an activity that the United States government expressly views as in conflict with its own national interest or that of one of its allies. This is a very important component in America's (as well as other nation-states) ability to project its power globally. It's not politically prudent or economically sustainable to attempt to project influence solely through the means of physical military presence and violence, so other softer means are a critical aspect of being able to maintain that influence.

Bitcoin is a massive potential disruption to this. Economic sanctions are enacted through control of the centralized infrastructure underlying the legacy financial system. When the government says SWIFT can't process transactions involving a sanctioned entity, they stop. When the government says Mastercard or VISA can't process transactions, they stop. When the government tells a bank to seize someone's money, they do. Bitcoin represents a big threat to the authority to dictate what financial infrastructure providers can and cannot process, which is the entire core of any sanctions regime.

Now instead of resigning to "digital scarcity, number go up" arguments to conceptualize how bitcoin can grow to become a dominant global money, let's consider the feedback loop again of a base utility value becoming the solid foundation of speculation. If bitcoin is to become that large and widely used, it needs a utility-based demand in a healthy proportion to support more speculative liquidity sustainably.


During the Obama administration 655 individual Iranians and entities were hit with U.S.-based sanctions. By near the end of the Trump administration that number grew to 962. Ever since the beginning of their nuclear program they have been harassed and bullied by the international community at the behest of the United States. While in 2018 the European Union decided they would not enforce U.S. sanctions against European companies engaged in legal business with Iranians, the U.S. still has a far reach around the globe.

In 2019 however the Iranian government legalized and regulated cryptocurrency mining in the country after a massive influx of miners attracted to their abundant and cheap natural gas reserves over the prior few years. Importantly it involved a licensing scheme. This was the beginning of a very important shift in the Iranian government's thinking regarding bitcoin and cryptocurrencies. Say whatever you want about the current regime in Iran, the potential for violent conflict, but at the end of the day the reality is the U.S. government is dictating to a sovereign nation what they are or are not allowed to do in terms of developing their own energy infrastructure, and coercively penalizing them economically to force them to comply. Bitcoin offers a way for them to route around that coercion. By 2020 the situation had calmed down and large Chinese operations were functioning smoothly, even to the point of having direct relationships with multiple Iranian ministries, and even the army.

Iran represents 17% of the natural gas reserves in the entire world. In 2011 the yearly value of their petroleum exports was almost $120 billion; in 2019, due to sanctions, that figure had dropped to less than $10 billion. Given that their government budget in 2010 was funded 80% by oil exports, sanctions have had a massive negative effect on their government’s budget.

Although it is much more difficult to directly export the petroleum and natural gas itself, they still have access to that energy, which can now be directly monetized through Bitcoin mining. In October 2020 Iran’s central bank issued regulation mandating that all licensed Bitcoin miners must only sell their coins to the central bank to be used as a means to pay for imports. This was specifically done to deal with dwindling foreign currency reserves and to maintain a way to bypass sanctions.

A massive influx of illegal miners in 2021 was used by the government as a scapegoat for issues with the national power grid, and although the degree to which this is factual is difficult to ascertain, for four months the government banned mining operations and used the issue as a justification to seize mining equipment and to shut down unlicensed operations. Also that year, the central bank amended their regulations to allow other Iranian financial institutions to use bitcoin to pay for imports, expanding its own role in that arrangement to actors in the private sector as well.

If sanctions are not lifted, then it is highly likely that the Iranian government will continue expanding their role in Bitcoin mining to maximize the amount of energy reserves that could be converted into bitcoin in order to have a means to pay for imports. How much their role grows and what form this takes is an uncertainty, but we can look to Venezuela for an indication. When they instituted their licensing scheme in 2020 for miners within the country, one of the requirements for mining legally was to mine with their national digital mining pool, a government-run service. This puts the government in total control of all funds generated by Venezuelan miners the instant new bitcoin is mined, and gives them total discretion of when and how much to pay out to miners.

According to the estimates of an Iranian think tank in March 2021, if the government "seriously intervenes" they estimate the capability to generate $700 million a year from mining. This seems correct for the estimate of around 4.5% of the network hash rate being in Iran from around that time period. What does "seriously intervene" mean? Because those numbers imply 100% of the hash rate in Iran is going straight into the government coffers. Is that simply continuing with the enforcement of requiring you to sell coins (if you do) to a government entity, or is that an implication of the potential for the government to outright seize hash rate and operate it themselves?


The most important property of Bitcoin is the ability to transact when people do not want you to, i.e., censorship-resistance. That is not just an important property for individuals. It doesn't just matter for drug dealers or political activists. It matters for entire nation-states. It matters for entire populations. Every time a nation-state levies sanctions against another, whether against whole industries or specific companies, that has a downstream ripple effect on everyone tied to those entities. It prevents revenue for sanctioned entities' themselves, i.e., an oil company that cannot export as much oil as they did prior to sanctions takes a hit to their bottom line. This affects the people employed by them, it affects contractors they might hire, it affects companies down the supply chain that they purchase from in relation to their business activity. It also affects the businesses that interact with sanctioned entities, who cannot always simply divert exported goods to another market and guarantee a proportional gain in sales somewhere else to offset the loss of sales from not being allowed to interact with a sanctioned party. This also has ripple effects down the supply chains, to their contractors and employees, etc.

Sanctions are at the end of the day just another facet of the financial system abused by those in control to force and coerce people into acting in accordance with their wishes and punish those who defy them. They are a tool of control and subjugation. Bitcoin is an escape hatch to route around them, and one with a real visceral need. In The Treasury 2021 Sanctions Review the Department of the Treasury highlighted the fact that from 2001 to 2021 the number of sanction actions by the U.S. Treasury has increased 933%. In the review they touched on numerous shortcomings of current sanction policies. In particular, they noted the dependence on U.S. allies cooperating with sanctions (remember the EU refusing to enforce Iranian sanctions?), the need to limit unintended collateral damage (specifically looking at the Taliban takeover of Afghanistan in 2021, and how long it took the Office of Foreign Assets Control (OFAC) to issue licenses to import humanitarian aid), and the growing use of digital assets to bypass sanctions.

The U.S. Treasury is taking stock, and realizing the effectiveness of their sanctions regime is weakening, and they are specifically aware of the growing use of bitcoin as a tool to bypass it. This is going to be one of the biggest drivers of nation-state adoption. What happens if Russia is actually hit with the types of sanctions the U.S. is threatening with the situation in Ukraine? "The mother of all sanctions" is going directly after the largest Russian banks. What if Russia is cut off from SWIFT? Russia has the largest natural gas reserves in the world, and already has twice the hash rate Iran does (roughly10%). Not to mention the recent situation evolving in Ottawa, Canada, where financial sanctions are literally being enacted by the Canadian government against their own citizens.

This is a truly utility-based driver for adoption: this isn't insurance companies making small speculative investments, or companies like Tesla and MicroStrategy making high-risk trades effectively leveraging their companies; this is a real need being met that cannot be adequately handled with other tools. It will come with massive consequences and backlash. Look at what happened in Ottawa in response to the bitcoin donations to protestors: the Canadian government "blacklisted" all addresses they observed involved with the fundraising, passing out lists to all exchanges to demand seizure of any blacklisted coins. They even went so far as sending a notice to a self-custodial wallet provider (Nunchuk) demanding user information and seizure of funds, prompting Nunchuk’s epic response demonstrating that doing so is literally not possible.

What types of regulations and restrictions will governments mandate if the use of bitcoin to bypass sanctions like Russia and Iran become commonplace? What will they do if that blossoms into whole parallel corridors of transferring funds internationally outside of the reach of the U.S. sanction regime? Either bitcoin is simply not suited for what it was designed for — making payments which authorities do not want you to make — or it is. We will find out.