Imagine a country which has a large economy and a despotic regime. This place is prosperous despite having complex and arbitrary rules and regulations designed to keep non-oligarchs perpetually nervous. Everybody has to carry an internal passport. Censorship and surveillance are all-pervasive. Bank accounts can be frozen at will. Property is confiscated on a whim.
Nothing is denied to the oligarchs and their little princes and princesses. But non-oligarchs must ask permission even for simple things like getting married, having children, running businesses, et cetera. Those who have become rich, never mind how, want to store nest eggs abroad in case the regime suddenly goes after them. But of course, it’s a criminal offense to walk into the bank and convert local currency.
So how do they do this?
One method is to deal in art objects. Buy a curio in local currency. Then sell that curio abroad in a foreign currency. Even if they do not make a profit, they at least would own some foreign exchange, having bypassed exchange regulations.
Suppose the curio in question is just a few lines of computer code? So buy some lines of computer code in local currency, and sell those lines for foreign currency. Even better, if they can do this transaction anonymously, for that would ensure that their stash of foreign exchange would not even come to the knowledge of the snoopy authorities.
Welcome to China (did you think I was referring to someplace else?), a large prosperous nation with currency controls and a one-party government. Welcome to bitcoin, ethereum, litecoin, et al, – computer codes that are curios and crypto-currencies.