You can transact despite the sanctions, but if nobody will accept your coins because they won't be accepted on exchanges, they are effectively useless, which is my point. Custody is meaningless when your wallet can be demonetized.

It’s more likely someone will accept them and that some exchanges will still accept them. What you’re suggesting requires perfect and total global coordination.

With fiat in a bank, you don’t have a chance since it just gets frozen and you don’t actually have custody. With crypto it’s more likely you can continue to transact.

It’s a matter of degree.

But why would someone accept your less-useful crypto when they can accept fully useful crypto instead? Other exchanges will either refuse to accept it (easier) or have to mark it as tainted and set up separate markets that accept those tokens and pay them out.

You're right that sanctions and restrictions could impact the price.

What I'm arguing is that this impact doesn't cause the price to be zero, requires global coordination to have a big impact, and that even in this case, the self-custody capability of crypto is still something better than the alternative (no access to any funds or any ability to transact). We're also discussing an extreme worst case (and even in that case it's still better than frozen non-custodial fiat funds).

Flagging wallets to exchanges also requires targeting and many people wouldn't get hit by this. There are also a lot of cases that benefit from self-custody in a world that doesn't have this extreme global coordination to sanction crypto.

Imagine the case where you're a random Ukrainian citizen in Russian occupied territory trying to get your wealth out across a hostile border. Your crypto wallet is not likely to be flagged to exchanges (even if it was most exchanges wouldn't care). You can memorize the seed words and get out safely with the ability to recreate your wealth on the other side.

This has already happened at least once: https://www.forbes.com/sites/tatianakoffman/2020/06/13/why-b...

If you're a random Ukrainian citizen in Russia, you can buy assets outside Russia and have your wealth on the other side before the sanctions. The fact that you can buy Bitcoin in Russia from other Russians and leave is only a temporary workaround with Russia not yet regulating it. People consistently mistake the fact that Bitcoin hasn't been regulated with the idea that Bitcoin can't be regulated, which is false.

It’s harder to regulate and easier to buy than assets outside of Russia.

This is probably why Chinese wealth leverages it to get around attempted controls by the ccp despite regulation.

> It’s harder to regulate

Why? It is just as easy to regulate as any other tracked asset. Physical items are much harder to regulate.

China simply hasn't started enforcement.

It’s harder to enforce regulations for self-custody crypto than it is to enforce regulations on centralized banks that hold wealth for you.

Mostly because it’s harder to confiscate (more akin to a physical item in your possession)