Could Russia replace the US Dollar with Bitcoin as a reserve currency? According to one prominent Russian economist, the Kremlin could begin diversifying billions of dollars into Bitcoin as early as February – when the United States plans to introduce new sanctions against Russia.
Russian economist and lecturer at the Russian Presidential Academy of National Economy and Public Administration in Moscow Vladislav Ginko believes that new forthcoming US sanctions will force the Russian government to diversify its cash reserves into Bitcoin.
Speaking exclusively to Australian crypto news outlet Micky, Ginko explained:
US sanctions may be mitigated only through Bitcoin use. […] Because of US sanctions Russia’s elite is forced to dump US assets and US dollars and invest hugely into Bitcoins.
According to Ginko, the Central Bank of Russia holds roughly $466 billion in reserves which it needs to diversify sooner rather than later in case – as he puts it – there are “limited opportunities” to do so in the future.
So when is this diversification likely to begin? Ginko believes that the first wave of Russian government investment into Bitcoin could begin “within weeks” and would result in billions of dollars being poured into the Bitcoin market.
I believe that the [Russian Government] will start diversifying its reserves with Bitcoin in February this year when US Congress will introduce a new sanctions against Russia.
How US Sanctions are Impacting Russia
Even though Russia is not a major trade partner of the United States – they aren’t even in the Top 15 according to the US Census Bureau – US-imposed sanctions are still having a significant impact on Russia’s economy. Billions of dollars in lost defense and energy contracts as well as the denial of credit or other financial assistance to key Russian lenders has resulted in a ripple effect that is being felt throughout the country.
According to Forbes, Russia saw almost no income growth last year. The country’s Audit Chamber reports that income gains were between zero and 0.4%, while chairman Alexei Kudrin tweeted last week that Russian wage earners can look forward to – at most – an increase of one-tenth of one percent this year. The US, by comparison, saw an average wage increase of more than 3%.
Spurred on by Russia’s sluggish economy, inflation surpassed last October’s official forecast by more than 55%, climbing to 4.2% instead of the projected 2.7%. The inflation rate in the US for the same period? Just 2.3% – and that is expected to carry through this year.
Can Russia Quit the US Dollar?
With Russia’s economy taking such a hit as a result of US sanctions, is it any wonder that the government is eager to move away from the USD as a reserve currency?
Back in November of last year, at the ‘Russia Calling’ investment forum in Moscow, President Vladimir Putin spoke about how he had no choice but to seek alternative reserve currencies in light of new sanctions:
We have no goal of moving away from the Dollar, it’s the dollar that’s moving away from us. Those making such decisions are not shooting themselves in the foot, but somewhere more delicate, further up the body.
Because there’s instability when it comes to doing business with the dollar, gives rise to a desire – and it’s happening all around the world – to find alternative reserves currencies and create a financial system independent from the dollar.
Russia isn’t alone in its effort to reduce its dependence on the US Dollar. Iran, Venezuela, and several other countries have also been taking similar steps.
Will Russia end up diversifying cash reserves into Bitcoin in response to the anticipated new US sanctions? How will it affect BTC price and volatility? Sound off in the comments below.
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