The Financial Freedom Report is a newsletter focusing on the role currency and banking play in the civil liberties and human rights struggles of those living under authoritarian regimes. We also spotlight new tools and applications that can help individuals protect their financial freedom.
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Hello readers,
This past week, Egyptians were told to put up with soaring inflation, while we saw Kazakhstan’s financial suppression of journalists and Pakistan’s continued rise in Bitcoin adoption. Plus, a new documentary on the economic and political turmoil in Lebanon and how, in the face of adversity, the Lebanese people are coming together to rebuild their beloved nation.
Let’s dive right in!
Egypt | Financial Repression
Dictator Abdel Fattah al-Sisi dismissed Egyptians’ concerns over their ability to buy essential goods amid growing prices. “Don’t we eat? We eat. Things are expensive, and some things are not available. So what?” This statement comes as the country prepares to spend billions on a luxurious new capital 45 kilometers east of Cairo, which Sisi claims is important for economic development. Critics argue the development increases the country’s debt burden while taking away from everyday Egyptians, who are already dealing with 30% inflation, foreign currency shortages, store closures, a new restriction on credit card withdrawals, and Sisi’s efforts to expand a $3 billion IMF program, which will force the country to undergo structural reforms. The pound is in freefall, losing a quarter of its value since the beginning of the year.
Russia | Asset Confiscation
A new law has been drafted in Russia that threatens to freeze the bank accounts and assets of citizens for spreading “fake news” about the regime’s invasion of Ukraine. The Russian banking system is already tightly controlled and monitored, leading to the rise of platforms like 21 Ideas, which share educational materials about Bitcoin and financial freedom in the Russian language. The law opens the door for the Russian government to confiscate funds from anyone who “attacks the foundation of the state.” The BBC notes that this law, which is going through an accelerated approval process, will be used to target dissidents and human rights activists.
Hong Kong | Journalists Association Demanded to Pay “Profits Tax”
The Hong Kong Journalists Association (HKJA) must pay HK$400,000 (approximately $50,000) in “profits tax” to the Inland Revenue Department (IRD). The calculations were reportedly based on HKJA’s bank deposits as opposed to their profits, a move that has perplexed the organization. HKJA added that their operational funding comes through sponsorship from major public and private institutions at its annual fundraising dinners. With a seeming lack of justification, byzantine taxes such as this one serve as a stern warning on the financial obstacles faced by press freedom organizations under authoritarian regimes.
Turkey | Currency Devaluation
The Turkish Lira has lost 92% of its value against the US dollar over the last decade, marking a historic low. Inflation rose to nearly 65% on an annual basis last month, eroding the purchasing power of the Turkish people and placing a considerable strain on their ability to afford basic goods. To counteract inflation and stabilize the economy, the Central Bank of the Republic of Turkey is continuing to raise interest rates, this time by 2.5%, bringing the benchmark rate to 45%. At the same time, Turks are flocking to Bitcoin and stablecoins as a way out.
Kazakhstan | Financial Suppression of Media
Kazakh investigative journalist Duman Mukhamedkarim faces two charges for carrying out journalistic activities and advocacy work. The first charge was for “participation in an extremist organization” after conducting an interview with a member of the political party Democratic Choice in Kazakhstan (DCK). The second for “financing of an extremist organization” after publishing a bank account number that could receive donations to provide legal support for political prisoners. According to lawyer and human rights defender Bota Jardemalie, the Kazakh regime “habitually levers false allegations” of extremism financing and abuses AML/CFT laws against opposition activists.” Activists in Kazakhstan regularly face financial restrictions, are unable to have bank accounts, and often have their assets confiscated.
Pakistan | Rising Bitcoin Adoption
Bitcoin adoption in Pakistan continues to rise amid a national economic crisis and creeping authoritarianism. With a population of more than 240 million people, where the majority live below the poverty line, and inflation exceeds 30%, Pakistanis are increasingly turning to bitcoin through peer-to-peer services. The country is considered a global leader in IT export services, and the national freelancing industry is also helping drive adoption in this area. Freelancers seek to hedge against inflation with foreign currencies like USD or GBP, and a growing number hold Bitcoin as an inflation hedge. HRF is happy to support Bitcoin Pakistan, which helps educate Pakistanis about an alternative currency system beyond government control.
Mutiny | Payjoin Support
Mutiny Wallet, an open-source, non-custodial, privacy-focused Bitcoin and Lightning wallet available as a web client or Android app, has shipped Payjoin v1 support with its v0.5.7 release. “We’re really excited about the privacy gains here and for future improvements such as Payjoin v2.,” the team said. “This should allow asynchronous payjoins, making it possible for a mobile user to payjoin with another mobile user.” Payjoin is a technique that can help prevent surveillance, as it “breaks the common-input-ownership heuristic” but remains“undetectable and indistinguishable from any regular bitcoin transaction.”
Bitwise | Public Transparency
Last week, the Bitwise Bitcoin ETF (BITB) became the first US Bitcoin ETF to disclose the bitcoin addresses of its holdings, which at the time showed 11858.63 bitcoin in its trust (valued at about $465,300,000 USD). “Publishing on-chain addresses is a first step toward increasing public transparency,” they announced. This move enables anyone to verify BITB’s bitcoin holdings and transactions directly on the blockchain, establishing a new standard for institutional transparency. Bitwise will also donate 10% of profits from its Bitcoin ETF to open-source development with recipient organizations including OpenSats, Brink, and the Human Rights Foundation.
Breez | Non-Custodial Lightning
Breez SDK has added support for offline payments, where a user can get a mobile notification to process an incoming payment. While this feature is only available to users of the Breez software environment, it’s a big UX improvement for mobile Lightning use and something to keep an eye on. In a recent article, Breez CEO Roy Sheinfeld puts this innovation in context, exploring the challenges and past attempts to fix the UX challenges of offline payments, discussing how they have deterred self-custody, and pointing to progress in this area as key to being able to conduct private mobile Bitcoin transactions.
Samourai Wallet | Bitcoin to Monero Atomic Swaps
Samourai wallet introduced atomic swaps in their public beta, allowing users to trustlessly swap between Bitcoin and Monero over Tor. Monero is a privacy-focused cryptocurrency that differentiates from Bitcoin by hiding transaction information from the public, making it nearly impossible for governments to trace user activity. This, however, comes at the cost of decentralization, liquidity, and publicly verifiable transactions. Atomic swaps allow individuals to exchange tokenized assets across different blockchains without the need for a centralized intermediary, enhancing user anonymity. It’s another privacy option for activists operating under constant financial surveillance, empowering them to continue their work in a more private and secure manner. You can learn more about this new feature here.
Btcd | Critical Bug Fixes
Niklas Gögge announced a consensus failure in btcd (an alternative to Bitcoin Core Implementation) versions prior to v0.24.0. Consensus is paramount to the integrity and longevity of a decentralized network. Bitcoin Optech Newsletter #28 said that with this failure, “it was possible to construct a transaction with a negative version number, which Bitcoin Core would require to follow the BIP68 rules but btcd would not.” This vulnerability could be exploited to trick a node into accepting invalid bitcoin. Software like btcd requires ongoing reviews and bug fixes, which is why funding for open-source software development, like HRF’s Bitcoin Development Fund, is critical for supporting developers in maintaining the integrity and robustness of the Bitcoin network.
OpenSats and Vinteum | Open Source Funding
OpenSats awarded long-term support to René Pickhardt, “helping him continue his fundamental research on improving Bitcoin’s overall usefulness as a payment system through the Lightning Network.” Funding will help Rene improve reliable payment planning, efficient payment routing, and explore new liquidity management strategies over the Lightning Network. In Brazil, Vinteum awarded funding to Leonardo Lima, whose “grant period will be dedicated to contributions to both Fedimint and BDK.” In particular, enhancing client and server tor support, developing multisig cosigning modules, and the potential of passkeys module on Fedimint, as well as adding native tor support to rust-esplora-client and rust-electrum-client.
“Lebanon, Life After the State”
By Peter McCormack
In the documentary “Lebanon, Life After the State,” journalist Peter McCormack dives into the country’s tumultuous political and economic landscape, unraveling decades of government mismanagement and corruption, which peaked with the tragic explosion at the port of Beirut on Aug. 4, 2020. He takes viewers through Lebanon’s chronic gridlock, hyperinflation, banking collapse, and the people’s efforts to rebuild with little to no governmental support. You’ll also see why some citizens have turned to bitcoin in their attempt to rebuild their beloved nation. McCormack captures the incredible resilience of the Lebanese people in the face of adversity and shows how people have come together when their government has collapsed and failed in its duty to support them.
Oslo Freedom Forum | Reserve Your Spot
Human rights advocates from around the globe will take the Oslo Konserthus stage on June 3-5, 2024, to share their efforts to defy repression and speak out against injustice. This year’s theme, Reclaim Democracy, emphasizes the pivotal role every individual plays within the global movement for democracy. The Financial Freedom team is looking forward to creating a program track exploring the role open-source money plays in preserving our human rights and civil liberties. Use the code 2024OFF to get an early bird discount on your ticket.
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