Central Banks Will Soon Line Up For A Piece of The Bitcoin Pie
The BoE´s refusal to return Venezuela´s gold shows how even governments need a truly independent, decentralized, not coercible and censorship resistant digital store of value
There are three key maxims in the world of crypto, “Not your keys, not your bitcoin”, “Not your node, not your rules,” and more generally “Don´t trust, verify”. Those three mottos summarize the key foundations of the Bitcoin protocol. While the last two refer to the decentralized nature of the blockchain and the way the consensus is created and transactions are added to the blockchain in a trustless manner, the first one sums up bitcoin´s resistance to coercion and its lack of counterparty risk. Somehow, that last one should also apply to gold. Likewise, gold is worth only if you physically hold it. Physical possession is 100% of its value. All the rest are just claims, IOUs, so called “paper gold”.
Venezuela is learning the lesson the hard way.
Following the 2011 repatriation of over 160 tonnes of gold from the US
and Europe by then charismatic leader Chavez, current President Maduro tried repeatedly to repatriate additional 31 tonnes of gold still vaulted with the Bank of England. The BoE now refuses to hand over Venezuela´s gold adducing laughable legal objections, such as the fact that England has recognized Guaido as the “legitimate” (i.e self proclaimed) leader of Venezuela. The true reason is more likely the pressure put by the US on its vassal to support Maduro´s overthrow and install its puppet Guaido.
Regardless of the reasons though, the lesson here is that any nation state
should be aware that when push comes to shove its adversaries will use any leverage to pressure it. Therefore, leaving a physical reserve asset such as gold with a foreign central bank is the most stupid thing any nation state can do. Remember “Not your keys not your bitcoin”, and thus for gold “If you don’t hold it, you don’t own it”.
Would China leave its gold reserves with the FED? Would Russia
leave its gold reserves with the PBoC? Of course not. Then why would smaller nation states run this risk and trust the FED or the BoE?
They shouldn´t either.
Shortly even the central banks of smaller nations will understand that bitcoin is — at least for portfolio diversification — a very appealing alternative to the old gold reserve asset. To avoid the risk of ending up empty handed like Venezuela, they might opt for a much leaner and flexible solution. Buy bitcoins then, set up a Xapo like secure vault at the central bank to store the private keys in air gapped hard drives and you are done. For sure your bitcoins will be there when you need them. No counterparty risk, no custody and transportation costs, no certification and inspection costs, trustless and independent.
Besides central banks´ reserve needs — on much broader terms — cryptocurrencies can also serve nation states´ geopolitical interests just fine. You know, they come handy in all those shady areas of clandestine operations. Such as circumventing sanctions, financing colour revolutions or putsches, supporting political opposition leaders in enemy states, create black budgets for deniable operations and so on. No need to stash loads of US$ 100 bills in airplanes and run an Air America like covert operation. No need to run laundering schemes like in the 1985–87 US-Iran-Contra affair. No more visible money trails left by the likes of Victoria Nuland and her US corporate donors in the 2014 Ukraine´s putsch. Just a click and your chosen political opponent has got the funds in his wallet ready to jump start a revolution, P2P, immediate, no trails left (with the right privacy coin of course). No doubt that governmental covert agencies already fully appreciate the features of cryptocurrencies.
Soon then also the central banksters will join the criminals, the Wall Streeters and 007s to the party, it is just a matter of when not if.
© www.bianconiandrea.com — 2020
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Originally published at https://hackernoon.com on December 20, 2020.