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.
Posted Using LeoFinance Beta
Las guerras generan cambios increíbles y está en específico posiblemente te genere un gran cambio económico en Rusia debido a las sanciones, como tu dices posiblemente ya estén desarrollando un método moderno digital que se relacione mucho con el bitcoin, es lo más seguro.
I had to translate your comment. Wars can lead to many changes. I don't know if Russia will develop something digital. Even if they do, that has to be accepted by the crypto ecosystem. Let's see if this situation helps take crypto forward.
While i do believe banks might start engaging with crypto more, i feel it will be more to understand it and how to try and control it in a regulated way rather then seeing the value it has for them because by definition banks are not decentralise
Banks may not be decentralized but owning something that cannot be confiscated is important for every individual, corporation, bank, and central bank.
Posted Using LeoFinance Beta
The rewards earned on this comment will go directly to the person sharing the post on Twitter as long as they are registered with @poshtoken. Sign up at https://hiveposh.com.
Congratulations @karamyog! You have completed the following achievement on the Hive blockchain and have been rewarded with new badge(s):
Your next target is to reach 29000 upvotes.
You can view your badges on your board and compare yourself to others in the Ranking
If you no longer want to receive notifications, reply to this comment with the word
STOPTo support your work, I also upvoted your post!
Check out the last post from @hivebuzz:
Support the HiveBuzz project. Vote for our proposal!