Both nation-states and private citizens around the world are likely to find it “very appealing” to keep control of their own money in light of the sanctions placed on Russia, and countries could start transitioning to bitcoin (BTC) for foreign reserves, Pantera Capital’s Dan Morehead has argued.
Morehead, the CEO and Co-Chief Investment Officer at Pantera Capital, wrote in his latest newsletter that,
“Countries may soon begin transitioning to bitcoin for foreign/cloud reserves. The ability to hold their own currency reserves will become very appealing to many nations and private citizens.”
He added that bitcoin is attractive to ordinary citizens because they want to “protect themselves from the financial impact of their government/dictator’s decisions.”
For governments, meanwhile, Morehead stated that the recent Western-led sanctions against Russia have already proven that foreign reserves held in fiat currencies controlled by other countries are not as safe as previously assumed.
Notably, this realization is now coming after the Central Bank of Russia has been cut off from most of the USD 630bn of foreign reserves it held before the war.
This has caused a collapse in the value of the Russian ruble, in turn forcing the central bank to raise rates to 20%, which Morehead said “should crush the housing market.”
In addition, major Russian companies traded overseas have seen a total collapse in their share prices, while Russia’s domestic stock market still remains closed.
“Everyday Russian citizens are getting financially decimated as a result of their leadership’s decisions,” Morehead wrote.
The comments from Morehead came after the US and other countries said they would “freeze” assets owned by the Russian central bank in their country in an effort to cut off financing of the war in Ukraine.
In addition, news emerged on Tuesday that a bipartisan group of senators in the US will introduce a bill aimed at preventing Russia from selling even the physical gold that it holds as part of its reserves.
The bill would apply so-called “secondary sanctions” to American entities that either transact with or transport gold from the Russian central bank holdings, as well as to entities that facilitate physical or electronic selling of gold in Russia, Axios reported today.
The goal is to get the legislation included in a broad spending bill that is expected to be passed this Friday, the report further said.
Russia has the world’s fifth-largest official central bank reserves of gold, behind the United States, Germany, Italy, and France. In total, the Russian central bank holds 2,301 tonnes of the yellow metal, according to the World Gold Council.