How Dictators Use Financial Repression Against Their Opponents

Economic freedom is one of a tyrant’s first targets. My family and I have experienced this firsthand. But tools like Bitcoin offer a lifeline for activists fighting repressive states.

By Félix Maradiaga

November 2024

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For tyrants, private property is one of the first barriers to be leveled in pursuit of despotic power. Worse still, assets that dictators steal can then be used to prop up their unfree regimes, extending their ironfisted sway by spending wealth that the regimes’ cadres never earned. Tyranny’s brave foes are punished and its ignoble cronies enriched, as money and property are first made targets of state assault and then doled out as rewards to regime loyalists. Further, democratic governments are being made unwitting accomplices to dictatorships, as such regimes cynically manipulate financial-surveillance systems set up to fight crime and terrorism, misusing these powerful instruments to harass, spy on, and hamper dissidents at home and abroad.

I have seen this ugly spectacle up close. At the age of eight in 1984, I was rudely introduced to the grim reality of life under an authoritarian regime by a gang of Sandinista militants who stormed into my mother’s store — a modest business that she and my late father had built with dedication and hard work. Shrilly denouncing her for selling wares “outside state control,” they emptied her shelves into trucks of the feared Internal Commerce Ministry and drove off. This was orchestrated pillage, cloaked as a policy of economic centralization by the Sandinistas’ repressive apparatus. My family had no involvement in politics, but the state arbitrarily expropriated other properties of ours as well. My family’s experience was not isolated; rather, it was part of a broad pattern of confiscation and financial repression that the Sandinista regime wielded to stifle dissent.

The Sandinistas’ systematic assault on private property was right out of the dictators’ standard playbook. Bank accounts, businesses, and real estate belonging to any Nicaraguan labeled “antirevolutionary” were snapped up by the state. Private banking was banned. The party-state’s control over the financial system extended beyond financial transactions to all repositories of value. As a result, hundreds of thousands of Nicaraguans, myself among them, were forced to flee the country with nothing. At age twelve, I headed north to escape the civil war and the Sandinistas, leaving my mother and siblings behind. I had to make a long overland trek to a refugee center on the U.S.-Mexican border, with only a few dollars that my mother had scraped together and hidden in my shoes.

On 14 February 1988, Ortega and the Sandinistas devalued Nicaragua’s existing currency, the cordoba, by a factor of a thousand. It was a sweeping act of theft from the people, wiping out the savings of millions of Nicaraguans in an instant. Families were forced to hand over their money in return for what amounted to a tenth of a cent on the dollar. My mother, who had spent years painstakingly rebuilding her business after the 1984 expropriation, found herself once again stripped of everything by the regime.

In February 1990, Nicaragua held its first free elections since the end of the Somoza family’s long dictatorship (1936–79). Violeta Barrios de Chamorro, widow of the slain newspaper publisher and anti-Somoza opposition leader Pedro Joaquín Chamorro, defeated Ortega 55 to 41 percent. Between the voting and her April inauguration, the Sandinistas shifted ownership of about 28,000 properties — amounting to more than a fifth of the country’s total land area — to their loyalists. Nicaraguans christened this new wave of plunder “La Piñata.” Amid the chaos, any citizen accused of being a “counterrevolutionary” could be targeted for confiscation.

When I returned to Nicaragua as a teenager in 1990, I came home to find a nation devastated not only by war but by the systemic destruction of value and the theft of assets. More than ten years of civil strife, hyperinflation, and coercive economic centralization had sunk per capita GDP to 1950s levels. Decades of economic progress had been wiped out, and we had been left one of the Western Hemisphere’s poorest countries. Nicaraguans’ savings, including their pensions, had vanished. The Sandinista elite and their closest followers, meanwhile, had become some of the wealthiest landowners. The pact that President-elect Chamorro made to secure a peaceful transition allowed them to keep these properties. Some original owners received fractional compensation that not only failed to make them whole, but also led to a public debt topping US$2 billion — a sum that Nicaraguan taxpayers are still paying.

The Sandinistas used the assets they had seized through economic repression to help themselves carve a path back to power. Ortega ran for the presidency and lost in 1996 (when he could not clear 38 percent of the vote) and again in 2001 (when he finished just shy of 43 percent). In 2006, however, democratic parties split, and Ortega won a four-candidate race with barely 38 percent.

The Sandinistas Return

The Sandinistas were back, and the adage “a leopard does not change its spots” never had a more apt illustration. The Sandinista Front quickly got back to targeting private property for seizure. In 2018, after peaceful protests against Ortega, I was falsely accused of masterminding a plot to “destabilize” the country. These accusations led to two assassination attempts, and the regime confiscated all my assets, as well as those of the civic-participation think tank that I ran, the Institute of Strategic Studies and Public Policies. On 7 July 2018, Daniel Ortega publicly accused me of funding “terrorist acts.” The state froze and later seized all my Nicaraguan bank accounts, and I was placed on international watchlists, including Interpol’s. Despite interventions by international bodies such as the United Nations, some of these measures continue to affect my life today.

The regime’s accusations intensified after I testified before the UN Security Council in September 2018. Despite the risks, I returned to Nicaragua a few months later in 2019 to face new charges — this time, of being a “foreign agent” and of “undermining national security and sovereignty.” After announcing my intention to run for president in the November 2021 election, I was jailed in June of that year along with six other candidates for the office. My sentence was thirteen years. I spent 611 days in a maximum-security prison under inhumane conditions until, in February 2023, due to international pressure, I was released — but not without first facing a new order confiscating all my assets and those of my family, along with a deportation order. Upon landing in the United States, I learned that I and the 221 other deported political prisoners had been arbitrarily stripped of our nationality and declared stateless by the Sandinista regime.

This is merely one instance in the broader pattern of repression that Ortega has used to crush dissent. In recent years, more than 450 Nicaraguans have been declared stateless and expelled, with their properties seized under made-up charges of money laundering, terrorism, or involvement in organized crime. Ortega has shut down more than 5,700 nongovernmental organizations and 26 universities, while more than 80 Catholic priests and 60 evangelical pastors have been exiled on allegations that they had used donations to fund subversive activities.

Even in exile, however, the persecution of political prisoners and their families continues. In September 2024, for example, the only house my mother still owned in Nicaragua was confiscated as retaliation for the prodemocracy work that I continue to do from abroad. My immediate family is banned from sending money out of Nicaragua or receiving money from abroad. Similarly, the state has seized every released political prisoner’s pension savings.

The Nicaraguan case is one of the most extreme examples of economic, financial, and asset-based repression in recent history, but it is not unique. Other cases include Cuba, where Fidel Castro’s regime nationalized properties en masse, many of which belonged to U.S. citizens, in the name of the Revolution; Zimbabwe under Robert Mugabe, who confiscated the lands of white farmers in a supposed redistribution effort that led to national economic collapse; and Venezuela, where first Hugo Chávez and then Nicolás Maduro expropriated industries, land, and opposition assets, weaponizing the financial system and anti-money-laundering laws to persecute and neutralize dissenters.

In the Soviet Union and other communist-bloc countries, systematic expropriation was the norm. In the People’s Republic of China, the communist party-state confiscates the assets of Uyghur citizens in Xinjiang Province, charging them with extremism and reinforcing its control through financial surveillance. These cases, alongside Nicaragua, reveal a pattern of authoritarian regimes utilizing confiscation and financial control to consolidate power and stifle opposition.

Economic, financial, and asset-based repression represents a systematic strategy employed by authoritarian regimes to consolidate and sustain political control through financial institutions and legal frameworks designed to restrict, monitor, and penalize dissidents and critics. This form of repression entails the instrumentalization of all available financial tools, both national and international, to neutralize political, civic, or social opposition while undermining the economic autonomy of critical people and groups.

In its most basic form, this type of economic and financial repression for political control manifests as confiscation of physical assets, such as land, properties, and businesses, under legal pretexts justifying expropriation. As financial technology has advanced and economies have become digital, however, authoritarian regimes have added newer methods that enable deeper, more precise control over the population. The list of tactics includes:

1) Financial surveillance and violation of banking privacy. Authoritarian states will access (legally or not) the banking data of individuals and organizations, including their credit-card spending and any other financial flows that can be monitored. Through international-cooperation mechanisms meant to help in the fight against crime and terrorism, and through the use of Financial Intelligence Units (or FIUs — state agencies designed to keep tabs on suspicious financial dealings), regimes can track dissidents’ money in real time, both domestically and internationally.

2) Charges of money laundering and illicit financing. These are among the most effective tactics that authoritarian regimes can use in their efforts to delegitimize and criminalize opponents. Under the guise of fighting crime or terror, governments will freeze accounts, seize assets, and suspend the ability of individuals and organizations to operate. Groups that are deemed regime-unfriendly and that receive international donor funds are especially vulnerable.

3) Confiscation of physical and financial assets. In addition to surveillance and financial control, authoritarian regimes confiscate physical assets such as properties, homes, businesses, and other tangible resources. These expropriations are often justified by laws meant to stop money laundering or support national security, but which also allow the state to strip assets from regime opponents.

4) Manipulation of national and international financial institutions. Authoritarian regimes coopt both national financial institutions (banks, central banks, finance ministries) and international organizations through norms and regulations such as those of the Financial Action Task Force (FATF) to impose sanctions and financially isolate critics. This enables authoritarians to block access to global financial systems, cutting off critics from any possibility of receiving donations, conducting international transfers, or even conducting basic transactions.

The Impact of Economic and Financial Repression

The type of repression I have been describing is extremely effective because it not only punishes current dissidents but also cuts off economic support for additional resistance that might be brewing. By depriving opponents of material means, authoritarian regimes push these critics into a corner where they cannot even organize, much less take action. Moreover, by violating banking privacy and criminalizing legitimate sources of funding, such as international support, authoritarian regimes isolate critics and further erode their capacity to push back.

Historically, confiscation has been a recurring tool in the hands of authoritarian regimes. In ancient, medieval, and early-modern times, the winning armies and navies of kings, khans, and emperors would plunder the vanquished. Modern dictatorships have laws and bureaucracies that also pillage to consolidate the ruler’s power, albeit now from behind a desk or a computer terminal rather than from the back of a horse or the deck of a warship.

While the monopolization of state violence has been widely studied, economic and financial repression as a state weapon has received far less attention. Stathis Kalyvas’s theory on the logic of violence in civil wars suggests that such violence is not an irrational outburst but rather a deliberate strategy of territorial control and social domination. Similarly, in contexts of civil conflict, the seizure of private property — especially in authoritarian regimes — can be seen as an extension of this strategic logic, where physical violence is replaced or complemented by economic and financial repression.

The case of the “Sandinista Piñata” in Nicaragua illustrates this dynamic. Rather than seeking to plunder indiscriminately, the Sandinistas used the state to legitimize the robbing of their opponents’ assets. In this way, economic, financial, and asset-based repression operates analogously to the selective violence that Kalyvas describes: The assets of those seen as counterrevolutionaries were expropriated under legislative decrees, lending a veneer of legality to institutionalized plunder. Doing so served both to cement the fealty of regime followers (made rich off the government’s thieving) and to structurally weaken any democratic opposition.

In the digital era and with the integration of global financial systems, authoritarian regimes have found more sophisticated ways to repress their opponents. Nicaragua’s case is again illustrative. Ortega has used FATF regulations to justify the confiscation of assets and freezing of more than $300 million belonging to churches, universities, and dissidents. This strategy has allowed the regime to shut down educational institutions such as the Central American University and pursue religious organizations, all under the guise of combating money laundering and terrorism financing.

Authoritarians manipulate the FATF’s forty recommendations for stopping money laundering and terrorist financing to justify financial repression. In Nicaragua, these recommendations have been used to close thousands of civil society organizations and expropriate their assets. Internationally, these measures can seem like “progress” in strengthening financial systems. We see this in a 2022 report from the International Monetary Fund that praises Nicaragua’s steps against money laundering without acknowledging how these same reforms have been used to suppress political dissent.

This pattern stretches beyond Nicaragua. Belarus, Kazakhstan, Russia, and Venezuela, have also leveraged FATF regulations to exclude opposition members from the global financial system. Researchers and activists such as Alex Gladstein, Jorge Jraissati, Andrew M. Bailey, Bradley Rettler, and Craig Warmke have documented how more than a dozen authoritarian regimes have exploited these recommendations to maintain control over the opposition.

What is even more concerning is how authoritarian regimes have capitalized on international cooperation networks, such as FIUs, to pursue dissidents who have fled abroad. These units, designed to track illegal transactions, are now used to spy on opponents seeking refuge in democratic countries. Too often, authoritarian regimes are able to access financial data in other countries, extending authoritarian control beyond national borders. This not only endangers activists but also compromises host-country sovereignty and thereby weakens the rule of law in democratic nations.

Bitcoin: A Lifeline for Activists

Faced with economic and financial repression, many prodemocracy activists and human-rights defenders working in oppressive environments see a lifeline in decentralized financial systems such as Bitcoin. Some of us targeted by authoritarians and committed to transparency and accountability have turned to Bitcoin not to get rich or to push an anarchist love of currency free from state control. Instead, we are simply looking for an answer to the systematic exclusion that we face in repressive states.

In countries where financial exclusion of dissidents is severe, including not only Nicaragua but Belarus, Russia, and Venezuela, Bitcoin has become one of the few reliable ways for activists to receive donations and continue their operations. Organizations such as the Human Rights Foundation, World Liberty Congress (WLC), the Nicaraguan Freedom Foundation, Alexei Navalny’s Anti-Corruption Foundation, and the Open Dialogue Foundation have pioneered the adoption of these technologies, using Bitcoin to circumvent the financial restrictions imposed by authoritarian states.

Even as Bitcoin provides critical support, however, challenges remain. Many financial institutions in democratic countries still see cryptocurrency fundraising as suspect and bearing the stigma of illicit activities. This view urgently needs to change if democracies want to keep supporting human-rights defenders working in repressive contexts. The use of Bitcoin by dissidents illustrates the broader need for freedom technologies that bypass authoritarian controls and offer alternatives to cooptable centralized financial systems.

Yet Bitcoin and freedom technologies are only a part of the solution. To truly empower those who champion freedom and human rights, international systems must prevent authoritarians from abusing rules against money laundering as well as financial-oversight mechanisms that were created to fight crime and terrorism, not peaceful democratic dissent. Addressing the systematic misuse of financial regulations will require coordinated global action. Democracies must ensure that authoritarian regimes cannot weaponize international standards, such as those set by the FATF, to suppress civil society. Creating a protective financial framework for activists and human-rights defenders is of the essence. Such a framework must enable access to resources without fear of reprisal. Financial and economic freedom, in turn, must be recognized as foundational to the defense of global democracy.

Félix Maradiaga is the president of the Latin America Liberal Network (RELIAL), a member of the World Liberty Congress, and a senior fellow at both the University of Virginia and Florida International University. He is the former secretary general of Nicaragua’s Ministry of Defense. While a candidate in the 2021 Nicaraguan presidential election, he was arrested and held prisoner until February 2023 by the regime of President Daniel Ortega, which stripped him of his Nicaraguan nationality and deported him upon his release. 

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