The Dilution Playbook

When EO6102 was issued by President Roosevelt during the Great Depression it was framed as a temporary measure to help the economy recover and all “patriotic Americans” were urged to comply with the order or face fines of $10 000 (approximately $200 000 today) and/or up to 10 years imprisonment. After all, the citizens needed a bit of motivation to do their patriotic duty right? This temporary measure remained in place for over 40 years and was only repealed in 1974. As has become the norm, the real architects of the Depression were shielded from the consequences of their actions and it was the unsuspecting public that paid for it in the form of capital controls, currency devaluation and the confiscation of their gold.

The Paper Gold Trick

In a 1974 cable released by Wikileaks, primary dealers explicitly planned to use gold futures volatility to "diminish initial demand for physical holding and negate long-term hoarding by US citizens." Furthermore, these primary dealers were of the opinion that U.S. citizens, on the whole, weren't psychologically prepared to switch from small scale gold purchases to large scale, long term bullion hoarding except maybe for gold coins. To put things in context, this was just after it was now legal again for American citizens to own physical gold and the predictions of the primary dealers turned out to be true. As of today, paper trading of gold surpasses physical demand for gold and is 200 times larger than the latter. 

Gold is hard to move and slow to settle, so the world delegated its custody to banks, which issued paper claims against it. Those claims could be multiplied well beyond the metal behind them. Today, unallocated accounts in the London bullion market give holders a claim on a pool of metal, not title to a particular bar. Gold was never outlawed again but It was diluted when its price discovery moved to paper. 

The Iceberg

The point of this brief walk down memory lane is to serve as a reminder that in times of economic crisis it’s always the unsuspecting public that is psyoped into paying the consequences whilst the architects get fat government handouts.With sovereign debt levels far exceeding global GDP, inflation raging, high energy prices thanks in part to the conflict in Iran, an out of control money printer and a higher unemployment rate; it would be a gross understatement to say that an economic iceberg is on the horizon. 

Bitcoin: Protest Money

Understanding these historical precedents is important in the era of Bitcoin because the same forces that converged to neuter gold after WW I and more so in the 1970s are much bigger today and have already been unleashed on the Bitcoin ecosystem over the years. Bitcoin emerged as protest money against the abuse of trust by monetary institutions that have been custodians of the financial system for centuries. 

As an asset without an issuer, Bitcoin doesn’t have counterparty risk that comes with trusted third parties and it’s more than just a store of value asset as most Wall Street pundits and the media lapdogs would have you believe. As an alternative monetary system, it exists to enable you to transact permissionlessly and ultimately be the bedrock of a new financial system. Bitcoin, is therefore, more than a store of value but It’s a monetary system designed to eliminate the need for trusted third parties.

Thus, reducing it to a Wall Street investment product misses the point because even if Bitcoin  appreciates in price but is increasingly held through intermediaries, it can succeed as a financial asset while failing, for many holders, as an instrument of monetary sovereignty; and this is why the attack on self-custody becomes important. You cannot easily confiscate a decentralised monetary network by shutting down a central issuer that does not exist but you can pressure its users to surrender control of their coins.

Every previous promise of trusted custody in the Bitcoin ecosystem has ended in betrayal. Mt. Gox in 2014 lost 850,000 coins, roughly seven percent of all Bitcoin in circulation at the time, to a theft the exchange concealed for years. Celsius, BlockFi, and Voyager sold themselves as the safe, regulated option and went bankrupt in 2022 with customer funds re-hypothecated into illiquid, sometimes unsecured loans. FTX, which was the second-largest exchange at the time, with celebrity advisors and investors, endorsed by regulators, audited by Tier-1 firms; vapourized eight billion dollars of customer deposits in a single weekend through a backdoor that funneled balances to a trading firm also owned by Sam Bankman-Fried. In every case the customer believed he held Bitcoin or its dollar equivalent; but in reality what he held was an IOU, which wasn’t as liquid as people thought.. 

Why Custody Is the Battleground

Every advantage outlined above depends on you holding your own keys. Let’s review a few examples of what happens to money held inside institutions:

• Cyprus, 2013: Uninsured deposits in the country’s major banks were seized to fund a bail-in.

• Lebanon, 2019: Banks froze withdrawals of dollar deposits, and savers lost access to their savings for years.

• India, 2016: Some 86 percent of the currency in circulation, by value, was invalidated overnight.

• Canada, 2022: Protesters’ and donors’ accounts were frozen without a court order under emergency powers.

Money held by an intermediary is only ever a claim, and claims can be restricted, frozen or rehypothecated. This is another reason why the powers that be hate Bitcoin and if they could, they would ban it outright, however they are aware that the more effective approach, as with gold, is to persuade holders to give up possession voluntarily. 

The Seven-Step Playbook

The case against self-custody can be classified into seven steps

1. Unmask users and destroy privacy. France’s finance committee voted for a declaration on self-custody wallets above €100,000, exempting custodian-held coins.

2. Make it very inconvenient. Since 2024, EU rules require exchanges to verify wallet ownership above €1,000.

3. Target developers. The Samourai Wallet developer received five years for software that never held user funds, which sends a chilling signal to anyone building privacy tools.

4. Make it intimidating. Reported firmware flaws and drained hardware wallets teach users that self-custody is risky.

5. Let the lists leak. Bribed Coinbase staff exposed tens of thousands of customers’ details, and France’s tax office was breached. Databases of holders become target lists.

6. Make it dangerous. Wrench attacks and home invasions are rising.

7. Offer the safe option. BlackRock cut its ETF conversion minimum from $25 million to $1 million, citing “kidnappings, ransom, custody failures.” The underlying coins sit with a custodian.

This pitch is identical to the one used to herd gold buyers into unallocated LBMA accounts half a century ago; keep your metal with us, the vault is safer than your house, and besides, the price is the same.  A self-custodied coin is base money; an ETF share is a credit instrument whose value collapses exactly when its issuer or custodian fails; which is to say, exactly when you most need it. The ETF, like the futures contract before it, makes Bitcoin legible to legacy balance sheets precisely by removing the property; direct settlement without counterparty, that made it a settlement network in the first place. In short, you no longer hold your keys but you are holding a position in a Bitcoin financial product, and the difference between those two states is the difference between sovereignty and a margin call. 

The Margin Call Trap

When these mechanisms from the debt=based fiat system are ported onto a sound money base, more and more people are separated from their coins. It works like this; 

1. The custodian holds your coin

2. You borrow dollars against it

3. You spend the dollars

4. The custodian now owns the collateral and the loan, and you own the obligation. 

When the price rises the arrangement feels like wealth, with everyone feeling like a genius. However, when the price falls the custodian issues a margin call you cannot meet without selling or topping up your balance with more Bitcoin, at the price the custodian's own desk has just helped establish. This is the 1974 unallocated-account pattern with one improvement, where instead of asking you to surrender gold in exchange for a paper claim, the complex now asks you to surrender Bitcoin in exchange for the “privilege” of going into debt against it. Fractional-reserve banking is fraud because the bank promises redemption to every depositor while lending the same funds to multiple borrowers. The Bitcoin-custody-plus-loan product recreates the fraud at the asset level, with one deposit and one borrower; both you.

Ownership Is Not Control

Owning an asset is not the same as controlling it. You can own an ETF that tracks Bitcoin’s price, leave your coins on an exchange, or pledge them to a lender and still participate in the Bitcoin market; but none of these arrangements gives you the same monetary sovereignty as holding your own keys and retaining the ability to authorize your own transactions. Self-custody is how an individual exercises that freedom. 

The Price of Freedom

None of this means self-custody is without risk. You become responsible for securing your keys, protecting your backups, planning for inheritance, and ensuring that you can recover access when something goes wrong. These responsibilities demand education, preparation, and discipline. That said, there is a fundamental difference between accepting responsibility for your own money and outsourcing that responsibility to an institution whose interests may not always align with yours. The choice, therefore, is not between risk and safety. It is between different kinds of risk, different forms of responsibility, and different degrees of control. Above all, do not confuse the convenience of a financial product with the freedom of owning money you can control yourself.

The Final Word

The financial-industrial complex does not need to destroy Bitcoin to neutralize its promise. It only needs to convince enough people that exercising that freedom is too inconvenient, too frightening, or too dangerous to be worth the effort. It needs you to surrender control voluntarily, until a monetary system designed to eliminate the need for trusted intermediaries becomes just another asset class dependent on them.

Do not mistake the surrender of responsibility for the achievement of safety. Do not mistake exposure to Bitcoin’s price for possession of Bitcoin itself. Above all, never forget that the freedom Bitcoin offers is not something a custodian can exercise on your behalf.