Feb 22, 2022
Crypto, Soros and the Global Drive to Fund a Revolution in Myanmar
(Bloomberg) -- Each weekend in Singapore, the Myanmar diaspora congregates at the Peninsula Plaza for news — and a taste — of home.
Customers stream into a pop-up food stall graced by a life-sized image of Myanmar’s deposed leader, Aung San Suu Kyi, where volunteers sell home-made delicacies such as tea-leaf salad and Mohinga, a rice-noodle and fish soup.
The stall’s owner, May Kyaw Soe Nyunt, says she takes in about S$5,000 ($3,700) in a weekend, with all the funds sent to her homeland to help those having to endure life under the military regime.
“I want the world to know people in Myanmar are suffering,” she said through a translator.
Singapore is one link in a global fund-raising effort that’s sprung up since the army seized control in Myanmar last February. With the economy in meltdown and no official international assistance, the exiled government is seeking to raise $1 billion to look after its supporters and maintain its challenge to the rule of the armed forces, the Tatmadaw.
But there’s a problem: The country’s banking system is tightly controlled by the junta, which designates the democratic National Unity Government (NUG) a terrorist group. So activists and the shadow government alike have to resort to unofficial channels to ensure the money escapes the regime’s clutches — and for the NUG, that includes embracing cryptocurrencies.
It has already recognized Tether, a digital coin intended as a proxy to the U.S. dollar, as a means to speed up its trade, services and payment systems. But the NUG is prepared to go further in defiance of the Central Bank of Myanmar, which banned the use of all digital currencies in 2020 and threatened imprisonment and fines for violations.
“When the time is right and if it’s needed for our revolution, we will definitely expand the list of our approved cryptocurrencies,” Tin Tun Naing, the NUG minister of planning, finance and investment, said in an interview. He cited Bitcoin and Litecoin, saying “we won’t hesitate to do it” if the NUG sees a need.
“Many institutions and organizations around the world are really eager to help us in this revolution,” he added.
While it’s unclear how much cryptocurrency the NUG has received, or how they can convert it to material support on the ground, the group itself is gaining traction globally. The European and French parliaments adopted resolutions recognizing the NUG as Myanmar’s only legitimate government, while U.S. Secretary of State Antony Blinken has tweeted support.
The junta defends the need for military rule saying that more than 11 million votes were cast fraudulently in the 2020 elections won by Aung San Suu Kyi and her party in a landslide.
Many of those in the democratic resistance have long garnered backing from billionaire George Soros. According to the present Ministry of Information, he visited Myanmar four times between March 2014 and January 2017 and met with Aung San Suu Kyi twice, while his son Alexander Soros visited seven times from 2017 to 2020 and met with her six times. Soros himself said back in 2012 that he’d been supporting the democracy movement in Myanmar for 20 years.
Myanmar’s military government announced last year that actions would be taken against the Soros-backed Open Society Myanmar for breaking the rules for organizations, having frozen its savings totaling some $4 million deposited at four local banks. The junta accused some of its staff of withdrawing deposits from a private bank and providing cash assistance to a campaign that opposes the military known as the Civil Disobedience Movement. Investigations are ongoing. The Open Society Foundation declined a request for comment on its role in Myanmar.
“The junta will try to block our sources of income if they know more, for example, from which banks” funds are flowing, said NUG Foreign Minister Zin Mar Aung, who as a student was sentenced to 28 years in prison for reading a poem critical of the military. So the NUG is using “more innovative ways to secure funds,” she said.
That includes “Click-to-Donate,” a web page directing viewers to a series of advertisement clips, with the amount raised depending on the number of viewings. In January, the platform raised S$457,765 ($341,000), its Facebook page shows. The NUG also launched a digital national lottery that in August reportedly sold out within an hour, raising over $60,000.
The shadow government has grander plans, though, as it seeks to ensure that schools and hospitals stay open, the wages of striking workers are paid, and it pursues its own Covid-19 vaccination program — all helping to keep resistance alive.
Perhaps its most ambitious move is a sale of what it calls “Spring Revolution Special Treasury Bonds.” Buyers receive a certificate promising to repay the sum paid in two years, without interest. An initial offer in late November proved so popular that it had to be pulled within a day of its launch. Sales resumed in January, and about $20 million has been raised.
“The NUG has been very innovative and I think pretty successful in raising funds in a number of different ways,” said Richard Horsey, a political analyst and senior adviser with the International Crisis Group. “But it’s nowhere near the amount of money they want.”
Myanmar has a long history of coups and military rule, but the periods of democracy have also been troubled. Aung San Suu Kyi, whose “struggle against oppression” was cited in the award of her Nobel Peace Prize in 1991, is a tarnished leader in the world’s eyes, after she defended the military in the wake of a 2017 crackdown against Rohingya minorities that was denounced by UN agencies as ethnic cleansing and genocide.
Major General Zaw Min Tun, chief spokesman for the State Administration Council, as the military regime is known, said that the deposed civilian government had presided over the country’s economic decline from 2018, a situation since exacerbated by Covid-19 and the outside imposition of “politically motivated sanctions.”
“The previous government didn’t support local businesses,” he said by phone. “They largely depended on external loans, grants and international support. Our economy was at risk.” In the year since the junta took over, Myanmar’s trade deficit has been turned into a surplus, “but we still need to do a lot,” he said.
He appealed to the public not to donate to the NUG or other opposition groups, saying the money will go toward weapons and “terrorist activities only. They spend nothing on public health, social affairs and economic activities that will help the people.”
One year after the coup, Myanmar’s military regime and the shadow civilian administration are effectively in a competition to establish parallel governmental and financial systems.
The junta is grappling with an economy weakened by clashes with armed ethnic groups, and has to contend with fleeing foreign investors and the threat of additional U.S. sanctions. The World Bank estimates Myanmar’s economy contracted by nearly 20% in the last fiscal year and projections show almost half of its 55 million population could be living below the national poverty line as of early 2022.
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That economic precariousness, along with a major cash shortage and a slew of penalties restricting financial flows into the country, has sent both the junta and the shadow government racing for innovative routes to generate revenue.
Sitting at the center of the NUG’s web of fund-raising efforts is Linn Thant, a former political prisoner who’s been in exile in the Czech Republic for more than a decade.
While Prague may seem an unlikely staging post in channeling finance to Southeast Asia, the Czechs are long-standing friends of Myanmar’s democracy activists. Vaclav Havel, the former president, proposed Aung San Suu Kyi to the Nobel committee.
The Czech Republic is one of few countries where the NUG is allowed access to a bank account — a thorn in the side of the Tatmadaw as it struggles to assert itself across Myanmar. The funds that flow through the account are used “strictly for humanitarian purposes” and not for military operations or weapons, Linn Thant said in his modest apartment office in an outlying district of Prague.
“From the Czech bank account, we are transferring to Thai banks, or U.S. accounts we have and then our partners, NGOs, buy humanitarian aid, food, clothing, water that is sent across the Thai-Myanmar or Indian border,” he said.
It’s in response to that kind of financial blockade where crypto comes in.
For the shadow government, crypto can bypass traditional intermediaries, namely banks and other financial institutions, allowing a degree of confidentiality as the junta tightens its grip. At least in theory, it also offers potential stability since Tether is supposed to be backed by one U.S. dollar, whereas the Myanmar kyat plunged almost 50% against the greenback after the coup before stabilizing.
“Nowadays many countries in the world are moving towards a cashless society,” Zin Mar Aung, the NUG foreign minister, said by phone from a secure undisclosed location. “Even if there are challenges, we will make sure to overcome them by making use of technology.”
A digital currency is also under consideration for when the revolution succeeds. “We already have infrastructure, technology, skilled personnel and institutions that will support us in place,” said Tin Tun Naing, the NUG finance minister. “We have everything ready.”
The junta is also studying the benefits of a digital kyat.
Last year anti-coup protesters in the finance sector, including central bank staff, refused to work in a bid to strangle the economy. The central bank said in May that banking operations were returning to normal, but months later junta diplomats abroad complained privately that the financial system was no longer functioning, according to the head of a crypto exchange involved in one such discussion.
“We are taking the establishment of a digital currency and improving online payment systems into consideration,” junta spokesman Zaw Min Tun said. He cited the goal “to improve financial activities in Myanmar.”
However, a digital kyat would also enable easier detection and monitoring of transactions aimed at overthrowing the government.
Still, it remains to be seen whether digital currencies can gain traction in Myanmar. Despite widespread launch of mobile services in 2014, internet penetration was just 43% in January 2021, according to Datareportal. As of 2019, under the civilian government, 74% of the population were unbanked.
Central banks need a sound regulatory structure and technology for digital currencies to be viable, said Kim Edwards, the World Bank’s senior economist for Myanmar. Hence, he said, Myanmar “is not in the best position to pursue something like this.”
One such attempt has already collapsed. Last year, an anonymous group launched the Myanmar Dollar, which aimed to replace the national currency with a digital one that leverages the NUG as the primary stakeholder. It failed amid a lack of support, according to a project volunteer who asked not to be named for fear of retribution.
On the ground, the situation remains grim, with Myanmar on the precipice of full-blown military conflict. Among the diaspora, many are willing to donate if it will help ease suffering and bring about a return to democracy.
At May Kyaw Soe Nyunt’s stall in Singapore, some forego the food and simply drop off packets of cash. She says she is unable to return home as long as the junta is in place. So she does the next best thing by raising funds, arguing that she has nothing left to fear.
Asked how the money gets to Myanmar, she declines to elaborate. “It’s complicated and dangerous,” she said.
©2022 Bloomberg L.P.