Financial Freedom Report #137
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- GLOBAL NEWS
- RECOMMENDED CONTENT
- BITCOIN AND FREEDOM TECH NEWS
- BITCOIN RECOMMENDED CONTENT
Welcome back to the Financial Freedom Report.
El Salvador’s $1.4 billion International Monetary Fund (IMF) loan is moving forward after officials reduced the government’s role in Bitcoin infrastructure. Majority ownership and control of the state-backed Chivo wallet have shifted to a private operator, while the IMF says recent additions to the country’s Bitcoin holdings came from private donations rather than public funds. This is a clear move to a more centralized financial system under the strongman Nayib Bukele, and a move away from the idea of a grassroots, Bitcoin-based system.
Meanwhile, the Liquid Network was paused after an exploit let attackers steal roughly 4,000 BTC, worth about $320 million, from the federation wallet backing LBTC, Liquid’s bitcoin-pegged asset. That represented nearly the entire balance held in the wallet and is one of the largest security incidents involving the infrastructure built on top of Bitcoin. The self-described “white-hat hackers” have since returned around 85% of the bitcoin they withdrew. This matters for our audience because several tools activists rely on use Liquid for its speed and privacy: more details below.
As recommended content, we feature a new Wall Street Journal essay from HRF Chief Strategy Officer Alex Gladstein on Bitcoin’s often-overlooked promise: financial freedom. Gladstein examines how Bitcoin can help people living under authoritarian regimes (and, more broadly, anyone facing an unreliable financial system) save, transact, and support civil society without depending on governments or financial institutions they cannot trust.
Now, let’s unpack this week’s news.
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GLOBAL NEWS
El Salvador | IMF Loan Moves Forward as Government Scales Back Bitcoin
El Salvador’s $1.4 billion IMF loan is moving forward after IMF staff reached an agreement on the program’s second and third reviews. This potentially unlocks another $140 million for Nayib Bukele’s hybrid authoritarian regime. As part of the deal, officials have substantially reduced the state’s role in Chivo wallet, which has been transferred to a private operator, while the government retains a minority stake and custody responsibilities for customer assets. The IMF also stated that no public funds have been used to purchase bitcoin since the program’s first review in 2025. According to documentation provided by Salvadoran officials, recent additions to the country’s bitcoin holdings came instead from private donations. However, the donor (or donors) have not been disclosed.
In context: The IMF agreement sheds more light on how Bukele is betraying his Bitcoin promises with the conditions attached to international borrowing. The government is stepping back from directly operating Chivo and says it has stopped using public funds to buy bitcoin, but important questions remain about who is privately donating bitcoin to the state and what influence, if any, those contributions carry.
Nicaragua | Regime Uses “Foreign Financing” to Bar Political Opposition
Nicaragua’s Ortega-Murillo dictatorship has approved the first stage of a constitutional reform that postpones elections and further dismantles the capacity for political opposition. Of particular note, the amendment bars anyone the regime accuses of “foreign financing” or “sanctions” from running for office or leading a political party. It also extends presidential terms to seven years and gives the regime-controlled electoral council greater power to cancel opposition parties. A second vote required to enact the reform is expected in January 2027. HRF calls on democracies to reject this authoritarian power grab and support the Nicaraguan people in their struggle for justice and freedom.
In context: The Ortega-Murillo regime has spent years turning access to money into a tool of political control. Nicaragua’s 2020 “foreign agents” law imposed sweeping restrictions on organizations receiving funding from abroad, while subsequent rules expanded financial monitoring of nonprofits and increased the capacity for financial repression. More than 5,600 civil society organizations have since been shut down. The latest reform takes that one step further: Ties to foreign funding can now become grounds for formally excluding someone from any political activity.
North Korea | Rural Families Turn to Foreign Currency
North Koreans in rural communities are increasingly converting even small amounts of savings into US dollars and other foreign currencies as confidence in the North Korean won deteriorates rapidly. Before COVID-19, $100 traded for roughly 800,000–900,000 won; today, it buys about 6 million won. That means someone who kept 900,000 won would have seen its dollar value fall from roughly $100 to just $15 in just a few years, while someone who held $100 better preserved their purchasing power. North Korean families are taking notice, and the shift is spreading even to farming communities, where foreign currency was once rarely used. This comes in the wake of the regime’s repeated crackdowns on currency exchange operators, which include arresting and sending them to prison camps. The result is that despite the need to acquire foreign currency, it’s never been harder or riskier for North Koreans to get it.
Russia | Journalist Faces Arrest for “Financing Extremism”
A St. Petersburg court ordered the arrest in absentia of exiled Russian journalist Alexander Nevzorov on charges of “financing extremism” and violating the country’s “foreign agent” law. Nevzorov, a longtime journalist and outspoken Kremlin critic, was previously sentenced in absentia to eight years in prison for reporting on Russian military abuses in Mariupol and Bucha. After Russian officials designated Nevzorov and his wife an “extremist organization” in 2024, the state confiscated their home, land, and other property. Officials later opened a new case accusing the couple of financing extremism for posting links online to collect donations for themselves.
In context: Just as Nicaragua uses ties to foreign financing to exclude opponents from political life, Vladimir Putin’s regime uses “foreign agent” and extremism laws to criminalize how dissidents receive and use money. In both cases, financial activity becomes another means of punishing anyone who speaks out against the regime.
Somalia | New Currency Reform Backed by Currency Board
Somalia is preparing to issue new shilling banknotes for the first time since 1991, when civil war crippled the country’s central bank and pushed much of the economy toward the US dollar. The new shilling would operate under a currency board, likely pegging it to the dollar and requiring currency in circulation to be backed by foreign reserves. Somalia also plans to maintain a dual-currency system, allowing dollars to continue circulating alongside the shilling.
Why this matters: In a country where political opposition, journalists, and civil society face systematic pressure from the government, rebuilding state control over money carries risks. Preserving access to the dollar gives Somalis an important alternative if the new shilling is later politicized or used against dissent.
China | Expands Cross-Border Payment System Abroad
China is expanding its Cross-Border Interbank Payment System (CIPS), the country’s infrastructure for settling international payments in renminbi. Chinese officials recently agreed to support Kyrgyz banks connecting to the network, while state media says CIPS can now reach financial institutions across 192 countries and regions. The expansion gives banks and businesses more ways to settle cross-border trade in a currency controlled by an authoritarian regime.
RECOMMENDED CONTENT
Bitcoin’s Overlooked Promise: Freedom by Alex Gladstein
In a new essay for The Wall Street Journal, HRF Chief Strategy Officer Alex Gladstein examines what happens when people cannot rely on their governments or financial systems to protect their savings, access their money, or transact freely. From collapsing currencies to frozen bank accounts, Gladstein argues that for 6.3 billion people living under authoritarian regimes — such as Russia, China, Nicaragua, Belarus, and Iran — financial independence can be a matter of freedom and survival. He makes the case for Bitcoin as more than just an investment, but rather as a tool that can help people save, transact, and support civil society without government permission.
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Become Unstoppable: Financial Freedom Webinar
For those challenging authoritarian regimes, access to money can determine whether their work continues. Governments can freeze their bank accounts, block donations, or cut organizations off from funding. This can leave a protest movement in Belarus without resources, journalists in Azerbaijan unable to report, or human rights organizations in Russia unable to operate. To help address this, HRF is hosting Become Unstoppable, a free, three-day webinar series running Sept. 21–23, from 10:30 a.m. to 12:00 p.m. ET each day. The series is designed to help human rights organizations and activists gain practical skills to use Bitcoin safely and effectively.
SIGN UP HERE
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BITCOIN AND FREEDOM TECH NEWS
Liquid Network | Security Flaw Drains Nearly 4,000 BTC and Pauses Network
The Liquid Network, a Bitcoin sidechain where users lock bitcoin and receive an equivalent amount of Liquid Bitcoin (LBTC), has been paused following a major security incident. An unidentified group describing itself as “white-hat hackers” withdrew roughly 4,000 BTC, worth about $320 million, from the federation wallet backing LBTC — nearly its entire balance.
The exploit appears to have stemmed from a bug in Elements, the software underlying Liquid. Liquid hides transaction amounts for privacy, so its nodes use cryptographic proofs to verify that users are not creating new LBTC out of thin air. A flaw in how those checks were cached allowed the attackers to make an invalid transaction appear as though it had already been verified, create roughly 4,000 unbacked LBTC, and then redeem it for real bitcoin. The group has since returned around 85% of the bitcoin it withdrew, but the fact that hackers kept 600 BTC they withdrew without permission calls into question whether they are actually white hats, or just hackers engaging in extortion.
The disruption also affects wallets and services that integrate Liquid, including AQUA, BULL Bitcoin, Blockstream App, SideSwap, Misty Breez, and Boltz. Their wallet keys were not necessarily compromised, but with roughly 600 BTC still not returned, the bitcoin reserves backing LBTC are no longer fully 1:1. Users should check service-specific updates before making Liquid transactions or swaps.
Why this matters: As increasingly powerful AI tools make it easier to find and exploit vulnerabilities in Bitcoin-adjacent software, developers need to use those same capabilities to continuously scrutinize their code and find weaknesses before attackers do.
Peach Bitcoin | Regulatory Review Risks Peer-to-Peer Trading
Peach Bitcoin, a self-custodial peer-to-peer marketplace for buying and selling bitcoin, is reassessing its operating model after a regulator challenged the framework that has allowed Peach to operate without mandatory identity verification since 2022. Peach says the model had previously been approved and successfully audited for three consecutive years. While the review continues, Peach has temporarily limited sell offers to experienced users and removed itself from the escrow process, allowing trades to continue without Peach co-signing transactions.
Why this matters: Peach gives dissidents a way to acquire bitcoin without handing their identity and funds to a centralized exchange that can be monitored or hacked by an authoritarian regime. It has been a popular option for dissidents in exile, as it’s available in many regions of Latin America and Africa, where many individuals rely on Bitcoin for their financial freedom.
Hack4Freedom | Brings Freedom Tech Bootcamp to Nairobi
Hack4Freedom is an HRF grantee and initiative that trains women from the Global South to build with Bitcoin, Lightning, Nostr, and other open-source freedom technologies. From Sept. 22 to Oct. 5, the program will host its next two-week bootcamp and hackathon in Nairobi, in collaboration with DADA Devs. Participants will learn Bitcoin and Lightning development, open-source collaboration, and how to build tools around real-world problems, before forming teams to create and present their own open-source prototypes. Sign up for the hackathon here.
Why this matters: Hack4Freedom is helping expand who gets to build freedom technology, not just who gets to use it. By giving women developers in Kenya practical experience, mentorship, and a path into open-source Bitcoin development, the program can help more tools emerge from the communities it is ultimately meant to serve.
ARFL | Decentralized VPN Marketplace Uses Bitcoin for Bandwidth
ARFL is a new open-source protocol that lets users buy virtual private network (VPN) bandwidth from independent node operators using Bitcoin over Lightning. Instead of creating an account or subscribing to a VPN company, users purchase bandwidth by the gigabyte and receive private Cashu ecash tokens that can later be redeemed for access.
Why this matters: VPNs can help people bypass censorship and protect their internet activity under authoritarian regimes, but centralized providers can become points of surveillance, payment censorship, or failure. ARFL explores a model where anyone can provide bandwidth and users can pay for access without creating an account or linking their identities directly to a browsing session. The project is still experimental, however, and currently relies on a coordinating hub for some critical functions. Learn more about it here.
BITCOIN RECOMMENDED CONTENT
Radar Chat with Seth for Privacy and Stephan Livera
In a conversation on the Stephan Livera Podcast, Cake Wallet developer Seth for Privacy explains how their new app Radar combines Signal-based private messaging with self-custodial Bitcoin payments. Users can send bitcoin over Lightning directly to their contacts, receive payments while offline, and remain in control of their funds, while Signal itself cannot see the Bitcoin transactions. Watch the episode here.
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