Bitcoin & Geopolitics - Week 10

A year after the start of the special operation in Ukraine, Western financial sanctions are tightening ties between the BRICS. This is what emerges from the G20 in New Delhi and the Valdai conference in Moscow.

New sanctions against Russian banks

On the anniversary of the start of the special military operation in Ukraine, Western countries unveiled new sanctions against Russia.

While they are unlikely to cause economic shocks, they will cause inflation and hamper the country’s industrial modernization.

THE UNITED STATES sanctioned eleven second-tier banks. And in particular Credit Bank of Moscow, the largest non-state bank in Russia. These eleven banks are now on OFAC’s blacklist and can no longer make transfers in dollars.

The EU has blocked Alfa-Bank, Rosbank and Tinkoff Bank. Relatively small, all these banks nevertheless had an important role since the disconnection from the SWIFT network of the seven largest Russian banks.

For Ivan Timofeevdirector of the program of the twelfth conference of the Valda club in Moscow, the continuation of the escalation of the sanctions against Russia is ” inevitable “ :

“This means that for Russia, the priority is to develop means of payment with foreign countries that are independent of Western currencies. It will also involve substituting certain imports and establishing trade relations with alternative suppliers in friendly countries. The solution to this problem will be complicated by the significant role of Western countries in global finance and supply chains. But also the maintenance of close financial and commercial ties between friendly countries and the Western initiators of the sanctions. »

Alternative to the SWIFT system

The sanctions cut off most of Russia’s banking network from the SWIFT system, but also nearly half of its foreign exchange reserves, which stood at more than $606.5 billion a year ago.

For the Russian Minister of Finance, these sanctions destroy the foundations of the international monetary and financial system based on the American dollar. Anton Siluanov was very clear at the annual meeting of the BRICS club in April 2022:

“These sanctions push us to accelerate work in the following areas: the use of national currencies for import-export operations, the integration of systems and payment cards and our own financial messaging system [équivalent au réseau SWIFT]. »

Russia already has its own version of the SWIFT network: the SPFS. This mechanism, as well as the Russian Mir card payment system, was created specifically to circumvent sanctions.

Nevertheless, the majority of countries refuse to connect to it, not for fear of American wrath. There Turkey knows something about it.

In this regard, Russian Foreign Minister Sergey Lavrov castigated US pressure on the rest of the world during the G20 in New Delhi:

“They told me what arguments the Americans used to persuade them to vote against Russia in the General Assembly. It’s very direct. They say ‘don’t forget you have a bank account at such and such a bank, and don’t forget your children go to Stanford’.

The penalties are not painless. But how long will the United States be able to pressure Russia if China and India, among other major nations, side with it?

BRICS, the anti-dollar club

Russian Foreign Minister Sergey Lavrov acknowledged late last year that at least a dozen countries want to join the BRICS. “Interest is very, very high and continues to grow. It’s not just about Algeria, Argentina and Iran.”did he declare.

“Since the applications are already officialswe believe that working out the criteria and principles for admitting new members to BRICS will not take too long”he had launched.

Who are these countries in a hurry to leave the orbit of Western influence? Saudi Arabia, Turkey, Egypt, Afghanistan and Indonesia have already applied or are about to do so.

Some media suggest that Kazakhstan, Nicaragua, Nigeria, Senegal, Thailand and the United Arab Emirates (UAE) are also in the queue.

Among these various nations, it is Saudi Arabia that will probably represent the most strategic addition. The recent deterioration in relations between the Kingdom and the United States bodes well for his integration into the club.

Indeed, it is obvious that one of the conditions of entry is to pursue an independent policy with a view to emancipating oneself from the Western monetary system. The fact that the Saudi energy minister declared in Davos that he now accepts the euro and the yuan goes in this direction.

What are the BRICS preparing?

Since 2019, a single payment system, BRICS Pay, has been under development. Its aim will be to dispense with the dollar by facilitating payments in national currencies.

It will also reduce dependence on the SWIFT, Visa and Mastercard networks. Developed in South Africa since 2019, BRICS Pay is expected to be fully operational by 2025.

Moreover, the question of a new reserve currency for the BRICS will be on the table at the BRICS summit in August. The idea initially formulated by the Valdai club in 2018 is to create a basket of national currencies.

However, this is easier said than done. China is indeed 72% of GDP of the BRICS. Therefore, swapping the dollar for a basket composed mainly of the yuan probably does not appeal to everyone.

Gold and the resurrection of the Gold Standard certainly have more momentum. Unfortunately, it is not easy to make gold payments via the internet…

Bitcoin, on the other hand… And what does its volatility matter, which is only temporarily linked to its small size (~400 billion $). The important thing is its absolute rarity. The rest will be history.

Does the world need an international reserve currency, uncensorable and guaranteed not to lose its value? It already exists. Bitcoin even has the good taste of being a currency at the same time as a payment system, on its way to the million dollars per bitcoin.

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