It's time central banks start seriously thinking about Bitcoin
Russia has been hit with sanctions post its attack on Ukraine. Sanctions include freezing any US debt that the Russian Central Bank held as part of its reserves. It is a different matter of course, that Russia continues to supply Crude and Natural Gas and there is no ban on that. So Russia can keep selling Crude at $110 to fund its war. However, what is unclear to me is how does that trade settle? I am assuming that banning Russia from the SWIFT network does not include proceeds from energy sales.
When the US issues debt, it is borrowing money. When a lender doesn't act according to the borrower, the borrower freezes that loan, thereby causing a loss to the lender. I wish the loans that I took from the bank worked like this. I could just freeze my loan if I was unhappy with the bank.
These loans are supposed to be the safest investment in the world. Central Banks buy these US government bonds because they are "safe" and are a proxy for cash - instant settlement. However, I guess no one prices the risk of them being frozen if you do something that the West can't digest - for example taking an extreme step for your national security.
What other options does a central bank have? Gold? Well, yes, but raising funds against Gold is not easy. For powerful entities that are extensively connected with the financial system, Gold may make sense. They can borrow against the metal when needed. However, how about citizens of countries embroiled in War. What about smaller countries that may face sanctions, countries that do not supply energy to the world? Poorer nations are not so well integrated.
No matter how poor or rich your country is, it is time that if you are in charge of financial stability in your country, you should start thinking about holding some reserves in Bitcoin. 24x7, instant settlement, and completely decentralized. The world's most powerful can't ban it. The current situation also highlights the importance of stablecoins.
Let's say you are a country that is facing the ire of the world powers. You are banned from the SWIFT Network and have other financial sanctions imposed on you. However, if you have Bitcoin or other cryptocurrencies, then the sanctions are ineffective as far as transaction settlement is concerned. However, powerful governments can also force crypto exchanges to stop functioning in your outcast country. Sure you can use VPNs but how do you encash crypto to your domestic currency? Crypto is also volatile, so one would need to track crypto prices constantly to settle transactions domestically. Not the case with stablecoins. You only need to track one exchange rate and stablecoins also keep you safe from currency crashes.
Central Banks of developing and frontier economies should start considering crypto to be part of their reserves. It is not necessary that as a country, your interests will always be aligned with your developed counterparts. A decentralized asset is also insurance against this risk of non-aligned interests. It is high time that such countries and central banks start pricing the risk associated with the debt of a country that is financially more powerful as a borrower than the lender.
Hey Brother haha it is as if you read my mind. It is time they embrace cryptocurrency of not they will regret not doing do. It is so painful seeing that they have nobody advising them to join.
Yes, they will look at it. I am sure no one will come out in the open and say that they are worried about US$ being used as a weapon. Even China will not say that even though it is a large and powerful economy.
hello @karamyog,
Money has always been a tool used for war, currently we are seeing how the United States is trying to stop the advance of the enemies Russia and China. It is worth noting that both Russia and China are countries in which their citizens enjoy little or almost no freedoms, this is where we must all ask ourselves, is it okay for people who steal freedoms to rule the world?
I won't say that people in Russia & China have no freedoms. Every economy has a different culture and specially with respect to India and China, I would request those in the West to understand the cultural differences and the history of people before saying what freedom people in China enjoy. There can be reasons why the current way of things in necessary for China's growth and stability.
When borrower can act as king over the lender, what more can we say? hahaha, I want that system too, where i will take a loan and just bring up an issue and mad at the bank.
I just shared about self development, it is obvious to every one that crypto should be largely accepted by all countries, but most government would rather stick to an old idea.
Governments prefer a system where your finances can be monitored and controlled by them, this is why they wouldn't adopt a decentralized system because they would not influence over your finances. Even though they see the advantages and opportunities that follow the adoption of cryptocurrency.
Our government in Nigeria for example sees crypto as a threat. But one thing is sure, when the right time comes the right thing will happen, the government itself would have no choice.
True, and I am worried that if this war extends, then a lot of countries are about to get into a lot of trouble. Especially those countries in Africa that have to import agricultural commodities. A lot of frontier markets will have to borrow more this year. I hope most leader are seeing the risks and planning accordingly.
May God have mercy on the world at large.
Cryptocurrency has shown that it offers a lot of benefits, most especially in the financial sector. WIth the adoption of cryptocurrency such as bitcoin, there will be more focus on decentralization, transparency and users will have full control and ownership of their cryptocurrencies which is great. Also, with bitcoin being a store of value, it offers even more benefits.
yes, Bitcoin is indeed pathbreaking!