Bitcoin & Geopolitics - Week 51

After Iran, Russia is also preparing to use Bitcoin for its international trade. Now officially a currency thanks to El Salvador, is Bitcoin on its way to becoming an international reserve currency?

Money is a weapon

The world has discovered that the West can steal foreign exchange reserves from a member of the G20, let alone a nuclear superpower. If Brussels and Washington were able to “freeze” $300 billion belonging to Russia, no country is safe.

Russia has also been disconnected from the SWIFT network which infiltrates all international transactions. Based in Brussels, SWIFT is a cooperative where each international bank has a voting right proportional to its volume of transactions.

Since the 2014 coup in Ukraine, Russia has made the development of its SPFS payment system a priority. Similar to system CIPS from China, it bypasses the SWIFT banking messaging system.

SPFS is increasingly used in Central Asia, within the Eurasian Economic Union (EAEU). But also in Turkey, Iran and India. Across Eurasia, more and more people are switching from Visa and Mastercard to UnionPay and Mir, not to mention Alipay and WeChat Pay, two very popular payment apps in China.

In October 2022, CIPS counted 1353 banks. Nearly 1000 are found in Asia (552 from mainland China), 185 in Europe, 47 in Africa, 29 in North America and 17 in South America. For comparison, the SWIFT system connects 10,800 banks in more than 205 countries.

Russia is trying to circumvent the SWIFT network by all means and all options are being explored. Stablecoins, bitcoins and CBDCs.

Russia’s Kremlin, Duma, central bank and finance ministry are divided on the issue, but common ground seems to be emerging, especially when it comes to getting rid of the petrodollar.

The BRICS want to do without the dollar

The petrodollar still accounts for 59% of global foreign exchange reserves. It will not fall into oblivion overnight. Nevertheless, reserves held in dollars have fallen by 12% since the turn of the century, from 71% in 1999 to 59% today.

Moreover, Xi Jinping’s recent visit to Saudi Arabia strongly suggests that the Middle Kingdom will sooner or later buy its oil in yuan, and no longer in dollars. Beijing and the Gulf Cooperation Council will adopt the petroyuan. Slowly but surely.

China will then no longer need the 1000 billion dollars it holds in reserve in the form of US Treasury bonds…

Let it be said, the end of the petrodollar is at the heart of the discussions of the EEU, the Shanghai Cooperation Organization and the BRICS+.

Beijing and Moscow no longer hide their strategy since the Maidan coup of 2014, and the trade war against China unleashed in 2018. The objective is to encourage the BRICS, the EEU and the SCO to no longer use the dollar and euro.

Trading in national currencies and/or a new international reserve currency to be determined is a top priority. And this knowing that the list of countries wishing to join the SCO and the BRICS is very long.

From South America to Asia via Africa and the Middle East, many nations are jostling for the gate to join the BRICS+ and SCO alliance.

The leaders of Algeria, Argentina, Egypt, Indonesia, Iran, Kazakhstan, Cambodia, Malaysia, Senegal, Thailand, Uzbekistan and Ethiopia participated in the BRICS summit from June 14 to 24, 2022…

Which currency will the BRICS choose?

Yours truly is convinced that Bitcoin will become an international reserve currency. He will very probably end up reigning supreme. And by the way, replace the 12,000 trillion dollars of current foreign exchange reserves would revalue BTC to $500,000…

Nations will end up realizing the absolute necessity of an international currency that is stateless, anti-inflationary, uncensorable and does not benefit any country in particular. The debate is raging in Russia.

Unsurprisingly, the Russian central bank announced in July that it favorite use a CBDC (Central Bank Digital Currency):

“The Russian ruble is the only legal means of payment in Russia. The Russian Central Bank sees the digital ruble (CBDC) as a preferred alternative to private stablecoins. »

Not very enthusiastic about Bitcoin, the Russian central bank had even recommended banning it in January, against the advice of the Ministry of Finance and the Kremlin.

Deputy Finance Minister Alexey Moiseyev told him in September that Russia work on stablecoins:

“We are working with a number of countries on the creation of bilateral stablecoin platforms to move away from the dollar and the euro. Stablecoins can be backed by gold, the value of which is clear and observable by all. »

Also in September, Elvira Nabiullina, one of the governors of the Central Bank of Russia was preaching for his parish without ruling out the use of bitcoin:

“We believe there is huge potential for international CBDC payments. Regarding digital financial assets, including cryptocurrencies [bitcoin], […] we are ready to discuss their use for international payments. But we oppose their free movement within the country”.

Ending in January for Bitcoin?

Whatever is decided, the central bank and the Ministry of Finance join on the need to get rid of the dollar:

“Our export earnings in national currencies, especially rubles and yuan, are increasing. The volumes made in yuan on the Moscow stock exchange have been multiplied by twenty”Elvira Nabiullina said in November.

On Monday, December 5, the chairman of the Duma’s financial market committee Anatoly Aksakov told him confirmed that Bitcoin will be legalized, but its use will be limited:

“I can assure everyone that cryptocurrencies will definitely be legalized next year. But one thing is certain, they cannot be used as a means of payment inside Russia”.

The MP also said that cryptocurrencies will be able be used to pay for imports, without specifying whether he was talking about Bitcoin or stablecoins.

We will see if, like Iran, Russia embraces bitcoin for its foreign trade. According to the Kommersant newspaper, sales of ASICs have recently exploded in Russia. There are unmistakable signs.

The bill is expected to be voted on in January 2023. But the latest news is that the Russian central bank is still dragging its feet. Here is for example what declared Deputy Governor of the Russian Central Bank Alexey Zabotkin this Friday, December 16:

“If you allow cryptocurrencies as an investment, they will inevitably become used as a means of payment as their ownership expands. It would be impossible to counter this phenomenon. »

Cry harder Alexey Zabotkin. Especially since the latter advocated the use of the CBDC to prevent people from spending their money as they see fit:

“CBDCs can be thought of as electronic banknotes. They will allow us to better monitor transactions and condition the use of the currency. For example, one can imagine, for example, pocket money programmed so that it cannot be spent on buying junk food. Of course, hundreds of other conditions can be programmed. »

The world needs Bitcoin which will naturally flourish on the grave of the petrodollar.

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