For Myanmar’s rebels, crypto adoption can mean life or death

In May of last year, just over three months after the military seized power from the civilian government in Myanmar, Wathon joined the country’s armed uprising. By then, the military had shot more than 700 nonviolent protesters dead, and young people across the country were taking up arms. Within his resistance group, Wathon was given a very specific task: managing its finances. (Wathon, along with others involved in the anti-coup movement, was granted anonymity for this piece due to risk of retaliation.)

Wathon faced immense obstacles to this assignment from the start. Hard cash is largely unavailable across the country, and the military has restricted the use of foreign currencies. In an attempt to starve the finances of groups like Wathon’s, the military has also at times directed banks to suspend accounts affiliated with the resistance. Wathon told Rest of World that four bank accounts associated with his group have been frozen, and that, as a result, the group has lost around 10 million kyats (about $5,000) in donations.

Wathon’s work is also dangerous. The military, which has arrested more than 15,000 people and killed more than 2,200 in its crackdowns on the pro-democracy movement, has imposed pervasive online surveillance. It also raids homes and stops people on the street, searching through their electronic devices and belongings. 

Sometimes, they’re looking for people just like Wathon: Last September, soldiers arrested the treasurer of an armed resistance group as she tried to flee her house with around 18 million kyats (about $10,000) in her possession. Villagers later found her body with a gunshot wound to the head; the cash was gone. This April, the military arrested seven people for donating less than $10 to armed resistance groups using mobile bank transfers. They were each sentenced to seven to 10 years in prison, under the country’s counterterrorism law.

The military arrested seven people for donating less than $10 to armed resistance groups using mobile bank transfers.

So, when the National Unity Government (NUG), Myanmar’s revolutionary anti-coup civilian administration, launched a pilot version of a new digital currency this June, Wathon was quick to sign up. “I think an application developed by the revolutionary government is more convenient and safer when receiving funds and making transactions for the revolution,” he said.

The NUG describes the cryptocurrency, known as the Digital Myanmar Kyat (DMMK), as performing the functions of a central bank digital currency (CBDC). This makes it perhaps the world’s first attempt at a national digital currency by a body which not only lacks access to a country’s central bank, but actively seeks to overthrow the institution that runs it. In other words, the DMMK aims to fund a revolution. 

To succeed in this initiative, the NUG faces a daunting path ahead: Even in the best of circumstances, establishing secure and stable digital currency is a massive undertaking. In post-coup Myanmar, its users must also reckon with immense political upheaval, raging civil war, and potential risk of death if their data is exposed. 

“There is a struggle, and currency is at the heart of it,” Dev Lewis, a research fellow at the internet and society research think tank Digital Asia Hub, told Rest of World. “Who controls the monetary system controls the power.”

During the ongoing pilot phase, the system has relied on 1,000 NUG-designated volunteer pay agents, each of whom is authorized to open 10 accounts for people determined by the NUG to be connected to the revolution. The DMMK operates on the open-source network Stellar, using its own mobile wallet, NUGPay. DMMK’s value follows the kyat value set by Myanmar’s central bank; fixed exchange rates for users outside Myanmar are posted twice a week on the NUGPay Facebook page. 

To open a wallet, users apply through the pay agents; to top up their wallets, they transfer money to the pay agents using mobile banking services, and the pay agents then buy DMMK directly from the NUG on the users’ behalf. So far, the DMMK is mainly used for people to donate money to the anti-coup movement or to move money within resistance networks. To convert the money back into fiat currency, users must again contact pay agents, who sell the DMMK back to the NUG.

Recently, alternative means of funding the revolution have narrowed, raising the stakes of NUGPay’s success. In August, the military began requiring that street-side mobile transfer agents install CCTV cameras in their shops or secretly photograph customers, and also that they collect new customers’ phone numbers and photos of their ID cards and faces. And on September 16, the military-administered central bank issued a public notice that it would begin cross-checking mobile banking users’ identities against its databases in order to prevent “unscrupulous people” from committing “illegal money transfers and swindling.”

“Every day, fundraisers and supporters are experiencing the forcible loss of their mobile wallet accounts and brutal arrests,” Min Zayar Oo, the NUG’s deputy minister of planning, finance and investment, told Rest of World. “To overcome these challenges, our legitimate government started the legal currency DMMK and NUGPay as a secure payment channel for the revolution.”

Interviews conducted with two NUGPay users, one pay agent, and one NUGPay “distributor” who is responsible for promoting NUGPay, along with a review of available data, indicate that many people and armed revolutionary groups in Myanmar have already placed their trust in NUGPay.

Data on the Stellar website shows that the volume of DMMK transactions has risen steadily, and that more than 42,000 NUGPay transactions have taken place. Min Zayar Oo told Rest of World in a written response to questions that, in the first 65 days after NUGPay’s release on the Google Play store, 9,000 people opened accounts, and that, as of September 7, there were 1.3 billion DMMK (approximately$620,000) in circulation.

To make transactions with other NUGPay users, senders scan a QR code linking them to the recipient’s account. On the NUGPay Facebook page, a list of some accounts accepting donations in DMMK includes numerous armed resistance groups, groups raising funds for an ongoing civil disobedience movement, and some schools and medical providers running outside of the military administration.

The NUGPay distributor interviewed by Rest of World, who focuses on promoting NUGPay in Myanmar’s  Kachin region, said that the number of users interested in opening accounts through her office has exceeded the pilot phase limit, and that those with accounts are increasingly topping them up. “[NUGPay] will grow depending on the revolutionary situation and the trust and participation of the people,” she said.

Wathon said that the ability to conduct transactions without the need for direct communication between senders and receivers has been a key safety feature. “We can be transparent and donors don’t even ask questions. We post [QR] scanners and give instructions, like ‘Please scan to donate,’” he said.

NUGPay’s affiliation with the NUG also appears to have boosted trust levels for some users. “We should support [NUGPay] because it is developed by a revolutionary group, the NUG,” said Solomon, the nom de guerre of a member of another armed revolutionary group, to Rest of World.

Support for the NUG among the Myanmar public has perhaps dispelled doubts over the DMMK, which have surfaced in other countries toward government-launched digital currencies — like China’s Digital Yuan — and which have drawn controversy for their potential to facilitate state surveillance. But DMMK users face a different risk: the data they entrusted to the NUG could fall into the hands of the junta.

“You don’t want to put people who are already in a vulnerable, life-threatening situation in a position of even more risk,” cautioned Ellie Rennie, a professor at RMIT University in Melbourne who focuses on social and policy questions arising from automated technologies, speaking to Rest of World. “You want to give them the most reliable, bullet-proof currency you can find or design.”

Min Zayar Oo told Rest of World that his ministry is confident the DMMK can withstand potential cyberattacks. The NUG, he said, collects only “very basic data” from DMMK users, has provided training to NUGPay agents, and, for security reasons, has restricted the number of users per agent to 10.

“We have to admit that NUGPay has to operate in strict, challenging conditions compared to a normal fintech business. However, we have regular discussions and consultations with undisclosed technical and financial experts concerning the security, expansion, and economic policy of NUGPay,” he added.

Still, two people told Rest of World that they are hesitant to try NUGPay for security reasons. Sein, a youth from Myanmar who recently left the country, said that even though the DMMK uses a blockchain — a cryptographic digital ledger technology — he is not yet confident that the NUG will be able to keep his data secure, especially since learning of a data breach from an NUG-linked school in July, which resulted in the arrest of at least 30 teachers. “I don’t trust the whole NUG way of running [NUGPay] enough to keep it safe, or to have the know-how to keep it away from the military,” he said.

“You don’t want to put people who are already in a vulnerable, life-threatening situation in a position of even more risk.”

Since shortly after the coup, Sein has been using cryptocurrencies as a means of exchange to get donations from abroad to striking civil servants in the country. But while he conducts those transactions on “trustless systems” — systems which do not rely on participants trusting each other or a third party in order to function — NUGPay relies on a human interface. “The red flag for me is having to contact agents to open an account,” he said. “How would you be able to trust … that they are running cybersecurity practices and are safe?” 

Aung Latt, who works in the tech sector and who has been given a pseudonym, told Rest of World that he also hasn’t opened an NUGPay wallet due to security concerns. “Whenever [people] use NUGPay, they need to cash in and cash out, move their real money to NUGPay, and use a Myanmar mobile bank account,” he said. “It is still risky.”

Adding to the DMMK’s challenges, the value of Myanmar’s kyat — which had already fallen to historic lows in September — has since dropped even further. At its launch on June 29, the DMMK was selling at 2,095 to the dollar; by September 1, it was selling at 4,400, according to rates posted on the NUGPay Facebook page.

The DMMK also takes the battle for legitimacy and control between the military and the NUG to a new front. The NUG describes it as the country’s “official digital currency” and a “legal currency” issued by Myanmar’s “only legitimate government,” while acting president Duwa Lashi La, in a State of the Union address on September 7, warned that the NUG considers support given to the military to be “aid to a terrorist organization.” The junta, for its part, has branded the NUG a terrorist organization, and considers the provision of financial assistance to the NUG or the armed anti-coup movement to be violations of the country’s counterterrorism law. Weeks before the DMMK’s launch, ithe military-controlled central bank warned that the use of mobile payments on unofficial platforms was illegal, according to a report by the local media outlet Mizzima.

But the two sides are fighting an uneven battle. On one side is a military, which, despite facing widespread rejection by the Myanmar public and mounting sanctions from Western governments, holds control over the country’s central bank. On the other side is the NUG, which lacks access to the central bank and has limited access to foreign banks, despite its strong domestic support and diplomatic relations with many foreign governments.

Lewis of Digital Asia Hub emphasized the enormity of the obstacles NUGPay is up against. “If the kyat is a volatile currency, it may not be offering the stability that people might want. But creating a whole new currency is itself a separate task and a different kind of challenge,” he said. 

The NUG also has significant limitations to its options for backing its digital currency, which, despite following the value of the kyat, is unlikely to be linked to the military-controlled banking system. The NUGPay website describes it as “backed by sovereign credit and fiat currency”; Min Zayar Oo told Rest of World that all DMMK was backed by a “strong currency” such as the U.S. dollar and the euro. “Our future plans include initiating talks with foreign financial institutions,” he said.

In September, the NUG asked the Federal Reserve Bank of New York to enable it to have virtual access to$1 billion in assets, which had been frozen following the coup, in order to back its digital currency. Min Zayar Oo told Rest of World that his ministry would disclose further details in the near future about how the DMMK is backed.

The past year’s cryptocurrency market crash offered a hard lesson in what can happen when public trust falters. Even stablecoins, which are pegged to reference assets and considered less volatile than “mined” cryptocurrencies such as Bitcoin, were not immune to the crisis. “How [The NUG] are backing [the DMMK] is really important. In theory, it should be backed by a basket of fiat currencies or other stable financial assets,” said Lewis. He also highlighted the tightrope which the NUG is now walking. “The NUG is trying to create an alternate currency that they are selling to the people of Myanmar: ‘Trust in us, believe in us, and if you do that, the DMMK will be real,’” he said. “How they explain this narrative and build this trust in the DMMK as an alternate currency to the kyat will be just as critical as its technical architecture.”