Nation states and individuals around the world are likely to find it “very attractive” to maintain control of their own money in light of Russia’s sanctions, and governments may start turning to Bitcoin (BTC) for their foreign reserves, according to Dan Morehead of Pantera Capital.
Morehead, CEO of Pantera Capital, wrote in his latest newsletter that,
“Countries may soon opt to transition to Bitcoin for foreign reserves. The ability to hold their own currency reserves is going to become very attractive to many nations and citizens.”
He added that Bitcoin is attractive to ordinary citizens because they want to “protect themselves from the financial impact of their governments’ decisions.”
For governments, Morehead said 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 thought.
This awareness comes in particular after the Central Bank of Russia was deprived of the $630 billion in foreign reserves it held before the war.
This caused the value of the Russian rouble to crash, in turn forcing the central bank to raise rates to 20%, which Mr Morehead said “should crush the property market.”
In addition, large Russian companies listed abroad have seen their share prices completely collapse, while the Russian domestic stock market is still closed.
“Russian citizens on a daily basis are financially decimated due to the decisions of their leaders,” writes Morehead.
Mr Morehead’s comments came after the United States and other countries said they would “freeze” assets held by the Russian central bank in their country in order to cut off funding for the war in Ukraine.
Separately, we learned on Tuesday that a group of US senators will introduce a bill aimed at preventing Russia from selling even the physical gold it holds as part of its reserves.
The bill would apply “secondary sanctions” to U.S. entities that transact or transport gold from Russian central bank reserves, as well as entities that facilitate the physical or electronic sale of gold in Russia, Axios said.
The aim is to include the legislation in a sweeping spending bill that is expected to pass this Friday, the report adds.
Russia has the fifth largest official central bank gold reserve in the world, behind the United States, Germany, Italy and France. In total, the Russian central bank holds 2,301 tons of yellow metal, according to the World Gold Council.
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