That doesn't have anything to do with USD. Any reserves (or really any asset) that is outside the country's jurisdiction can be seized by a foreign one. El Salvador could as easily lose all their Bitcoin reserves if they held them in a Coinbase wallet, for example.
Comment you're responding to is saying this is not unique to U.S. dollars. All currencies are controlled by their issuing sovereigns.
Separately, the idea that Bitcoin is unsanctionable is laughable. It may require enabling legislation. But marking wallets as sanctioned, and threatening any wallets that transact with it to be either similarly sanctioned or subject to heightened scrutiny, would diminish the value of those coins relative to coins which can be freely traded with anyone. Given the public nature of the blockchain, enforcement would likely be easier than e.g. enforcing an Iranian oil embargo.
Doesn't this already happen? Basically any bitcoin that comes out of a tumbler or any wallet address that has transacted with tumbled coins is banned on KYC exchanges: https://sethforprivacy.com/posts/fungibility-graveyard/
Litecoin just introduced a sidechain called (mimblewimble extension blocks) MWEB, it permits “cut-through” transactions where UTXOs can mix. It looks like a single UTXO on the main chain. Very Fungible!
The problem is one of pragmatism. All money is dirty. All great fortunes are founded on exploitation.
Every dollar in your pocket has been used for crime many times. The system works because we choose to ignore this. If we could programmatically enforce rules, the system would be fail in a day.
So it’s not about money laundering, it’s about achieving some kind of pragmatic equivalence, while permitting the system to continue to function.
My point is that eventually the major cryptocurrencies will have some fungibility enhancement mechanisms to deal with the practical limitations of taint and chain analysis. Tornado cash, Coinjoin, MW, etc. Its not about normalization of crime. It’s the default ignorant status quo.
I hear similar things from the NRA about how we'd all be safer if everyone carried a concealed firearm. I just don't want the world to be a place where we all have to be armed and launder our money after every transaction.
There is always a balance that needs to be struck between privacy and accountability. Bob Woodward violated the privacy of the Nixon white house, but we generally believe the public interest there outweighs the privacy concerns at stake. I am always particularly skeptical of financial privacy maneuvers, since they are of considerably greater interest to the already rich and powerful.
I don’t know if I agree about accountability balance — accountable to whom?? It is better if everyone is equally blind. Technology that takes power from the powerful is our weapon. You don’t need accountability if there is nobody to be accountable to.
Creating a new form of privacy means creating a new arena in which to conceal malfeasance, and some will inevitably take advantage of that. Privacy can become a means of entrenching power as easily as it can become a means of distributing power. Wealthy people and organizations in the US sue journalists for invasion of privacy to prevent embarrassing information from being published. In the US, some parties have been lobbying and suing for decades to be able to spend unlimited sums with no public disclosure on political and influence campaigns.
Interesting to consider that many gun owners likely don't want the world to be a place in which they feel the need to carry a firearm.