[JamilD]

> allow some US startup to undermine their currency and distort their financial system

How is it undermining a currency and distorting a financial system to allow people to exchange their OWN hard-earned money for another currency?

[kristjansson]

Trading currencies is basically zero-sum. A VEF/USD seller needs a USD/VEF buyer. That buyer demands some VEF for each USD i.e. the floating exchange rate. In a free market, imbalance in the foreign exchange flows either reduces the exchange rate, or forces the issuer to take action by supporting the market at the desired rate with USD reserves, or offering higher interest rates to attract more dollar demand, etc. All of those are expensive, so some issuers might try to prohibit foreign exchange at rates less advantageous than the desired rate. Circumventing that prohibition (i.e. capital control) lessens its effectiveness.

None of which is to say that capital controls are a good thing, but you can understand how a government might want them, and might view circumventions as 'distortions'

[vosper]

> How is it undermining a currency and distorting a financial system to allow people to exchange their OWN hard-earned money for another currency?

In practice, it's because the government of that country says that it is.

[tokioyoyo]

I don't agree with capital controls either, but it's still illegal in some countries. Basically any country where, in my opinion, it would be a good idea to use such services.

[awesome_dude]

Currency crisis are quite debilitating

https://catalogue.nla.gov.au/catalog/3070732 - The Malaysian currency crisis : how and why it happened / Mahathir Mohamad

edit: Sorry that first link is for a book

This might be better https://www.investopedia.com/articles/economics/08/currency-...

second edit - I'll add the relevant paragraph

> Anatomy of a Currency Crisis

> Investors often attempt to withdraw their money en masse if there is an overall erosion in confidence in an economy's stability. This is referred to as capital flight. Once investors sell their domestic currency-denominated investments, they convert those investments into foreign currency.

> This causes the exchange rate to get even worse, resulting in a run on the currency, which can then make it nearly impossible for the country to finance its capital spending.

[tokioyoyo]

That's fine and dandy, and I agree. But it's still illegal to provide means to circumvent the law. Well, depends on the country and enforcement I guess. It's pretty hard to do so.

[awesome_dude]

Is that rhetorical, or have you never heard of currency controls and money laundering?