Kerby Anderson

Yesterday I talked about “debanking,” which occurs when an individual is denied banking services because of their political stance or business venture. What happens when this happens to a nation? We call that action “financial sanctions” and have seen many examples of that in the last decade.

The U.S. and its allies were able to freeze Russian financial accounts and shut off the Russian central bank’s access to hundreds of billions of dollars of foreign reserves. The IMF was able to suspend the Taliban’s access to various funds and financial instruments.

As legitimate as these actions might be (punishing Russia for invading Ukraine or punishing the Taliban for terrorist activities), they concern other countries. Will the U.S. or other international agencies one day punish them for a policy they enact? That is why many countries are looking for another currency than the dollar, which still serves as the world’s reserve currency.

That is why the BRICS nations have been talking about developing another currency. That is also why they and other nations are turning to bitcoin. Harvard PhD student Matthew Ferranti argues for that in his research paper, “Hedging Sanctions Risk: Cryptocurrency in Central Bank Reserves.”

These banks have begun to acquire gold and bitcoin. But, he warns, they might not be able to collect enough gold and should consider the digital asset of bitcoin to hedge the risks of sanctions.

Why are nation-states talking about acquiring bitcoin? First, they see it as a digital asset. Recently Federal Reserve Chair Jerome Powell referred to bitcoin as “digital gold.” Second, they see it as a hedge against sanctions risk. You never know when a nation or international organization would want to shut down your finances.