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Central banks could resort to cryptocurrency reserves as a means of integrating national gold reserves according to veteran cryptographer Nick Szabo. He also argues that the use of digital currencies will increase in countries with disrupted economies.
Cryptocurrency on gold
Speaking at the Israel Bitcoin Summit of the Tel Aviv University on January 8th, legendary cryptographer Nick Szabo said that national central banks could resort to cryptocurrency reserves as a means of integrating existing national gold reserves.
"Bitcoin could survive a nuclear war" @ NickSzabo4 #bitcoinsummit pic.twitter.com/IIn1CzyKJ9
– Steph Vaughan👩💼🚀 (@GoodStephV) January 8, 2019
One of the reasons why this happens, according to Szabo, is the potential lack of trust between banks or foreign governments:
There will be some situations in which a central bank can not trust a central bank or a foreign government with their bonds, for example. […] One solution that has been developed is to have the Swiss government in hand for you – it's not a minimized trust solution. The Swiss government itself is subject to political pressure and therefore a more reliable and minimized solution is the cryptocurrency.
Furthermore, Szabo also notes that gold reserves are "physically vulnerable", saying:
The other problem with gold reserves is that they are physically vulnerable. When the Nazis conquered countries in Europe, the first place they went was the gold reserve of a central bank.
Bitcoinist reported on the unsettling similarity in the historical performance of gold and Bitcoin in the past. Unlike gold, however, Bitcoin "has more utility" admitted the US economist and critic Bitcoin Paul Krugman.
The Winklevoss twins have also recently stated that "Bitcoin is better at being gold than gold", expecting it to exceed 7 trillion dollars worth of precious metal in the future.
Helping troubled economies
Another thing shared by the Bitcoin pioneer is that censorship-resistant cryptocurrencies will increase in popularity in countries that suffer from a failed monetary planning, as well as those that have been blacklisted by the trade.
There seems to be substantial merit in his thoughts. Venezuela, for example, is a country that is currently being torn apart by hyperinflation. In fact, the director of the Western hemisphere department of the International Monetary Fund, Alejandro Werner, said that 10 million the percentage inflation rate is not out of the picture:
Yes, 10 million percent because prices in Venezuela double or triple each month. And this, when you take it to 12 months, generates an exponential rate of inflation.
Such as Bitcoinist reported at the end of December, the country has seen its biggest leap in bitcoin volume on LocalBitcoins.
In addition, a Russian university lecturer with ties to the government, Vladislav Ginko, recently revealed that the country is planning to invest in Bitcoin as a means of avoiding US sanctions.
It remains to be seen if this is true, but US sanctions have very little effect on a neutral global digital currency like Bitcoin
"Because of US sanctions, the Russian elite is forced to discharge US assets and US dollars and invest heavily in Bitcoin, Russia's central bank is on $ 466 billion of reserves and must diversify if there are limited opportunities to do so (in the future), "said Ginko.
What do you think of Nick Szabo's claims? Do not hesitate to let us know in the comments below!
Images courtesy of Shutterstock
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