Myanmar, an embattled country in Southeast Asia, has a tumultuous political history. Now, cryptocurrency is playing a role in shaping the country’s political future. Myanmar’s National Unity Government, which is led by supporters of the ousted and detained leader Aung San Suu Kyi, has recognized Tether as an official currency.
The NUG finance minister Tin Tun Naing said in a Facebook post on Sunday the NUG will accept Tether for “domestic use to make it easy and speed up the current trade, services and payment systems,” according to a Bloomberg report.
Tether is a stablecoin whose value is pegged to the dollar. This means that Tether’s price does not fluctuate as much as volatile cryptocurrencies like Bitcoin or Ethereum and that each Tether can be exchanged for a dollar —making it more suitable for payments. There’s controversy, however, regarding Tether being fully backed by reserves.
While Tether has repeatedly claimed that its coins are fully backed by cash and its equivalent, the company settled with the New York State Attorney General for US$18.5 million without admitting to wrongdoing earlier this year. As part of the settlement, Tether is barred from doing business in New York state.
In October, an investigation by a Bloomberg journalist revealed that Tether — whose reserves include commercial paper — has been lending out to large Chinese companies and other crypto businesses, potentially risking a bank run if the investments went bad. In the same month, the U.S. Commodity Futures Trading Commission fined Tether for US$41 million for publishing misleading claims about its reserves.
It is important to note that the NUG is a shadow government that does not control any territory or hold any positions of power in Myanmar. Therefore, NUG accepting Tether is not the equivalent of Myanmar accepting Tether as legal tender.
To understand how that works, it is important to understand the country’s political history. Myanmar, formerly known as Burma, was under military rule for nearly half a century, from 1962 to 2011. The military junta that ruled Myanmar suddenly dissolved in 2011 and a civilian parliament was set up for the transitional period.
In 2015, the country had its first multi-party election in decades in which Suu Kyi, the daughter of independence hero General Aung San, became the de facto leader. But the military continued to yield considerable power across different spheres.
In 2020, Myanmar had its second election in which Suu Kyi’s National League for Democracy party won a landslide victory. The military, which backed the opposition, claimed fraud, but the country’s election commission rejected the claims. So Tatmadaw, the Myanmar military, staged a coup, seized power and declared a one-year state of emergency in the country.
Suu Kyi is being detained at an unknown location to date and is facing various charges including violating the country’s official secrets act, possessing illegal walkie-talkies and publishing information that may “cause fear or alarm.” The armed forces have also put several NLD party members under house arrest since the coup.
The coup has attracted severe criticism and protests in which hundreds have been killed. In September, NUG, which is allied with Suu Kyi, declared war against the military junta. The NUG is trying to raise US$1 billion to fund this war — which the junta says violates the anti-terrorism laws — and has begun accepting Tether as part of the fundraising endeavor.
The NUG has been trying to raise funds through the sale of “Spring Revolution Special Treasury Bonds,” which are designed as a direct lending instrument. The bonds raised US$9.5 million in the first 24 hours of sale but no information is available on how much has been raised to date.
Besides, accepting Tether is also a direct defiance of the military rule. The country and the Bank of Myanmar, the country’s central bank, had outlawed cryptocurrencies in May last year. So, Tether, the world’s largest stablecoin by market cap, has become a tool for Myanmar’s shadow government to stand up against the military rule.
Moreover, Tether, like every cryptocurrency, cannot be blocked by governments and the peer-to-peer transfer system offers greater privacy compared to fiat currency. Therefore, tracking Tether transfers to NUG and preventing them would be difficult for the junta, allowing the revolution to thrive.
