This is an opinion editorial by Daniel Feldman, the CEO of Green Block Mining.
In 2016, after I sold a gaming company that I founded with a high school friend to a group of former executives from Amaya/PokerStars, I was looking for the next thing to do. In 2017, I discovered bitcoin. I would argue with my brother-in-law and father-in-law about the efficacy of cryptocurrency, but could not effectively support my position. So, to learn more and be able to better defend my pro-crypto stance, I started a blockchain and cryptocurrency meetup in New York City. I moderated discussions with curated speakers and hosted a post-meeting dinner, giving time for further discussion and networking. The meetup became popular. Investment banks, family offices, funds, startups, friends and a variety of interesting people regularly attended for three years until COVID-19 hit.
I began each of my meetups with a play on the “Fresh Prince of Bel Air” theme song, “Parents Just Don’t Understand,” by saying, “North Americans just don’t understand.” It was a way to introduce three stories that demonstrated both the global need for decentralized money and why North Americans do not innately understand this. I only gained this perspective by living outside the U.S., through my time living in Moscow as a student and then later as an expat worker.
In 1984, a teacher said that he could teach anyone the Russian past tense in fifteen seconds, which convinced me to begin studying Russian in high school at Buckingham Browne and Nichols in Cambridge, MA. In 1990, I spent the first semester of my junior year in college on a study abroad program in Moscow, USSR at the Pushkin Institute for the Study of Foreign Languages. Students from all over the world studied and lived together in the two dormitories, separated by socialist and non-socialist countries. It was a fascinating time during the final months of the USSR. The first McDonald’s and a Pizza Hut had opened.
The official ruble/dollar exchange rate was $2 for one ruble, but on the black market you could get 64 times that, 32 rubles for one dollar. You had to make at least one exchange at the official rate to get a bank receipt to show that you had at least some rubles via a Soviet bank, but afterward you could trade on the black market. All of the foreign students at my institute traded their hard currency into rubles. This was made easy because Mustafa, a much older student from Uganda who lived on the 11th floor of our dormitory, was a money trader. We would go to his room with our hard currency, in my case U.S. dollars, and he would light some incense, offer us a shot of Russian cognac and then pull out a suitcase full of neatly stacked Russian rubles from under his bed. He offered the best rate in the city. I have no idea where he got so many rubles or who he was trading the money for. Was it the Russian government? The school? The Ugandan government? I will never know, but it made for easy and safe access to rubles. We knew that there were a lot of scams involving old, outdated ruble notes or people who just took your money and ran away if you tried trading on the streets of Moscow.
One day, our resident assistant said that the U.S. ambassador had called to tell us that all 50-ruble bills would be taken out of circulation at the end of the week. This was not public knowledge. Each Soviet could take six bills to the bank, have their domestic passports stamped, and be given new 50-ruble bills. As the Soviet Union was a mattress economy, this government act was going to devastate the savings of much of the population. No one wanted the government to know how much they had in savings and no one trusted the state-run banks to hold their money. With this advance notice from the ambassador, we took our 50-ruble notes and bought Soviet champagne and cognac from a group of Nigerian students who sold alcohol in the dormitory, and threw a big party for all of the students studying at our institute.
Of course, when it became public knowledge that the 50-ruble notes were being canceled, the Nigerians were outraged as they immediately knew that the privileged Americans must have had advanced notice as we paid them in 50-ruble notes only. I was only able to calm them down when I gave them a Bell Biv DeVoe cassette as a peace offering.
In 2002, eleven years later, I was now a lawyer. I moved back to Moscow, Russia, no longer the Soviet Union. I worked for Yukos Oil at a new office building near the Paveletsky train station. My office was on the top floor with great views of Moscow and the nearby train station. Occasionally, while walking to work from the nearby metro station or looking down at the commercial area surrounding the train station, I would see long lines outside a bank. People would wait for hours in these lines. Russians are famously good at waiting in lines, but that reputation was mostly earned during the Soviet era when deficits of food and necessary goods were more common, so these lines seemed out of place. I asked a Russian colleague why there were lines and she matter-of-factly replied, “That bank is going out of business and customers are being offered 60 cents on the dollar to get their money out.”
A few weeks later the bank would re-open and another bank would announce it was closing and another line would form. Watching from above, it was like a game of nefarious musical chairs. After the collapse of the Soviet Union in the early 1990s, a middle class slowly developed and an increasing percentage of the population had to use privately run banks to hold their money. They had no choice as their savings were too large to keep under their mattress, and they could not afford the 24-hour security for their apartment that they would otherwise need. So they had to trust untrustworthy banks and understood that losing some of their money was part of the cost of protecting their savings. This is somewhat analogous to a negative interest rate.
I worked directly for an oligarch who was the richest Russian. I was also friendly with other expats who worked for wealthy Russians, ranging from billionaire oligarchs to mini-garchs worth only in the hundreds of millions of dollars. They had great stories. One was once called into his boss’ office where he was greeted gruffly with the question, “Who is this Mr. Dow Jones and how can I meet him?” Another friend worked for a mini-garch who was told he had five days to leave the country. His businesses were going to be taken from him without remuneration, but he was not going to be arrested and would be allowed to leave Russia to live in exile. He was given less than a week to pack up and go. There was no appeal process; that was that.
However, there was a problem. Like many wealthy Russians, he had full-time armed bodyguards and kept U.S. dollars in his apartment for large transactions like buying a car or property, or to pay bribes to stay in business. The mini-garch had $7 million in cash and no way to get it out of the apartment, let alone the country, by the end of the week. Three police cars sat guard 24 hours a day in front of his building, a guard was at the door of the apartment and at least one followed him wherever he went.
My friend arranged for two western Europeans to fly to Moscow the next day. They met at the mini-garch’s apartment. The two men arrived in slim-fitting black suits with white shirts, monochromatic black ties and awesome shoes.1 Each brought a thin black leather briefcase. No change of clothes. No extra luggage. They did not book hotel rooms. They ate their meals in the apartment. They spent 44 hours in the apartment and then were driven directly back to Sheremetyevo airport, one of the two commercial international airports in Moscow. Nothing was left behind and nothing was taken. Soon after, the mini-garch, accompanied by my friend and body guards, left the building. The mini-garch tapped one of the police car windows with a toothbrush and said, “Gotov, poyekhali,” which means, “I’m ready, let’s go.” He got into his Mercedes G-wagon, without any luggage, and was driven to Domodedovo airport, the other commercial international airport and left Russia. Two of the police cars escorted him to the airport. The third car stayed and the officers got out of their car and walked into the apartment building and I assume they went right to the mini-garch’s apartment. That much money has a distinct smell, it smells like vomit from being handled so many times. I am sure they could smell the money that had been in the apartment. They likely searched for it, but I know that they did not find it. It was not in the walls. It was not in the furniture. It was not below the floorboards. It was not on the roof and it had not been thrown out of a window. It was gone.
As a reminder, I tell these three stories to demonstrate why “North Americans just don’t understand.” The first story is an example of life in a country where the government-controlled currency cannot be trusted. We have no concept of that here in North America with our access to the almighty dollar that serves as…