According to popular cryptographer Nick Szabo, Central Banks might resort to cryptocurrency reserves as means of supplementing national gold reserves. The industry expert also thinks that countries with troubled economies will see an increase in cryptocurrency usage.
Cryptocurrency Demand to Increase in Failing Economies
Attending the Israel Bitcoin Summit at the University of Tel Aviv on January 8th, Nick Szabo laid down his thoughts on cryptocurrencies and their position in traditional economies.
He holds that Bitcoin, as well as other censorship-resistant cryptocurrencies, will see increased demand in countries where economies are shaken from failing financial practices. The same will happen in countries which have been blacklisted from international trade.
It’s easy to find reason in his words, especially after the events of late.
Just a few days ago, Vladislav Ginko, a Russian university lecturer with ties to the government said that the country plans to invest in Bitcoin in order to circumvent US sanctions.
Because of US sanctions, Russia’s elite is forced to dump US assets and US dollars and invest hugely into Bitcoins. The central bank of Russia sits on $466 billion of reserves and has to diversify in case there are limited opportunities to do it (in the future). – Ginko said.
Better Than Gold
In addition, Szabo holds that Central Banks will eventually turn to cryptocurrency reserves as means of supplementing national gold reserves.
The expert thinks that this will be driven by the lack of trust between foreign governments:
There’s going to be some situations where a central bank can’t trust a foreign central bank or government with their bonds for example. […] One solution that’s been developed is to have the Swiss government hold it for you – that’s not a trust minimized solution. The Swiss government itself is subject to political pressures and so a more trust minimized solution is cryptocurrency.
Additionally, Szabo made another valid point, outlining that gold is technically vulnerable, while Bitcoin, for example – isn’t.
Live Bitcoin News recently reported that central bank innovation will mainly hinge on gold and Bitcoin.
What do you think of Nick Szabo’s position on cryptocurrencies? Don’t hesitate to let us know in the comments below!