Central banks in countries that face a risk of being sanctioned by the US could shift their international reserves to include bitcoin (BTC), a new Harvard University research paper has argued.
The research paper based the idea of central bank risk hedging with bitcoin on the fact that many central banks – and in particular those facing a higher risk of US sanctions – in recent years have increased the share of their reserves made up by gold, a traditional central bank reserve asset.
According to the author, adding a BTC allocation in addition to gold would further increase the resilience against sanctions for these countries. This is especially true in cases where the country struggles to acquire enough physical gold, the author argued.
Titled Hedging Sanctions Risk: Cryptocurrency in Central Bank Reserves, the newly published research paper is written by Matthew Ferranti, a PhD candidate in economics at Harvard University.
“The ability of fiat reserve issuers to freeze transactions, which constitutes a form of de facto default on the underlying obligations, calls into question fiat reserve currencies’ status as ‘safe haven’ assets,” Ferranti wrote.
Ukraine war could make central banks more interested in Bitcoin
In the paper, Ferranti pointed to the freezing of Russia’s international central bank reserves in the aftermath of the invasion of Ukraine as an example of why this question is now more relevant than ever.
“[…] it is timely to explore the question of how, and to what extent, the risk of financial sanctions may motivate changes in central bank reserve composition,” the PhD candidate noted in the paper.
Proof-of-work is censorship-resistant
Ferranti also noted in his paper that bitcoin, as a proof-of-work-based digital asset, is particularly useful as a sanction hedge.
“Under a proof-of-work system, the ability to censor transactions on the blockchain requires achieving ‘majority hash power,’ meaning that the censor must control at least 51% of the computing power employed by all miners,” the paper said.
It added that achieving such a status is unfeasible “due to the sheer quantity of computing power dedicated to Bitcoin mining, as well as the amount of electricity required to power the mining chips.”
In conclusion, Ferranti admitted that no asset is “totally safe” in the presence of sanctions, but that cryptocurrencies like bitcoin can offer “some protection,” although the protection comes with higher volatility.
Source: crypto news
O’Hare International Airport Unveils Modernized Terminal 5 with 25% Increased Capacity
Meet the American who taught the Tuskegee Airmen to fly: Pioneer pilot Charles ‘Chief’ Anderson
Suspect in Molotov Attack on NJ Temple Mapped Out Other Potential Targets: Prosecutors
Police offering $10K for information in deadly Newark hit-and-run
Ferrari Employees To Get Nearly $15,000 Bonus After Excellent 2022
Sesame Vegetable Fried Rice With Baked Tofu Recipe
Spaghetti With Bacon and Broccoli-Parmesan Cream Sauce Recipe
Whole Wheat Dumpling-Topped Chicken Pot Pie Recipe
Butternut Squash and Pea Mac and Cheese Recipe
Google Pixel Watch Review: A Fun Smartwatch to Help Build Your Fitness Game
Author Says Meghan Markle Bullying Report Findings Were ‘Swept Under the Carpet’ Because Buckingham Palace Didn’t Want to ‘Pick Another Fight With the Sussexes’
Medical Testing Services – Tax Considerations Of New Activities
A heart that’s true: journalist Mike Tharp 1945-2023
‘The Challenge 38’: Olivia Kaiser Reveals She Broke Her Face in 5 Places
Baswedan’s rise stoking Indonesia election flames
Finance20 hours ago
Capital One Stock Gained 12% In One Week
Tech19 hours ago
AI Says Earth Will Hit Critical Global Warming Thresholds Faster Than We Thought
Auto21 hours ago
Volvo Says We Should Stay Tuned For A Sports Car
Lifestyle20 hours ago
Rita Ora Reveals Massive Wedding Ring After Marrying Taika Waititi
Travel19 hours ago
Quick N’ Easy: Experience fully automated shopping at Brussels Airport’s Pier A
Auto22 hours ago
GM Investing $650M In Nevada Lithium Mine For EV Battery Production
Travel19 hours ago
Ellaidhoo Maldives by Cinnamon leads the way in sustainable hospitality
Travel20 hours ago
Emirates Takes Flight with 100% Sustainable Aviation Fuel in Milestone Demonstration