Harvard Paper Explains Why Central Banks Need To HODL Bitcoin

November 24, 2022 10:29 pm Comments

U.N. international sanctions have plagued many nations across the globe.

No region knows this more than the Persian Gulf—home to oil-rich nations such as Iran, Iraq, and Qatar; countries that constantly bear the brunt of U.S.-led sanctions.

Recently, Russia became the latest victim of international sanctions following its invasion of Ukraine.

Both nations have turned to crypto since the start of the conflict, in Russia’s case, it has been to escape crippling sanctions, in Ukraine’s case it has been to accept war-relief donations.

The international use cases for Bitcoin and cryptocurrencies have never been stronger and one Harvard P.H.D. student is throwing his weight behind that point of view.

Matthew Ferranti recently wrote a paper extolling the virtues of Bitcoin, more specifically, he makes a case that the central banks of heavily sanctioned countries should invest heavily into Bitcoin reserves.

He argues that Bitcoin can provide a cushion against sanctions and financial ruin by giving a country options to settle crucial international transactions free from the financial shackles of attempting to trade in USD or other fiat currencies.

A Bitcoin standard could be the final nail in the coffin of the already ailing petrodollar system—a system that is being increasingly shunned by other countries.

In the last couple of days, Ghana has announced intentions to trade oil in gold, while the BRICS countries have also pushed for trading oil in other currencies other than the USD.

With signs like this appearing with greater frequency, how long can an overprinted and over-exhausted U.S. dollar hold out? More importantly, how long can the petrodollar system and the hegemony of U.S.-led sanctions last?

Here’s more on the story:


Politico asked Ferranti:

So why would a central bank bother with Bitcoin?

They’re not correlated. They both sort of jump around, so there’s diversification benefit to having both.

And if you can’t get enough gold to hedge your sanctions risk adequately — think about a country that has very poor infrastructure, doesn’t have the capability to store large amounts of gold, or countries whose reserves are so large that they simply cannot buy enough gold.

Places like Singapore and China. You can’t just turn around and buy $100 billion of gold.


ZY Crypto notes:

According to Ferranti, the ideal combination will be to have both assets for the benefit of diversification. Ferranti disclosed that he prefers central banks tilting towards gold “because it is five times less volatile” than BTC.

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