BoE’s refusal to return Venezuela’s gold shows how even governments need truly independent, decentralized, not enforceable and censorship-free digital storage
There are three key maxima in the world of crypto, “Not your keys, not your bitcoin”, “Not your goal, not your rules,” and more generally “Don’t trust, check”. Those three mottoes summarize the key foundations of the Bitcoin protocol. While the latter two refer to the decentralized nature of the blockchain and the way in which the consensus is created and transactions are added to the blockchain in a non-trusted way, the first one summarizes resistance bitcoin to coercion and its counterparty risk deficit. Somehow, that last one should apply to gold as well. Similarly, gold is only worth it if you hold it physically. Physical possession is 100% of its value. The rest are all just claims, IOUs, known as “paper gold”.
Venezuela is learning the lesson the hard way.
Following the 2011 return of over 160 tonnes of gold from the US
and Europe by then, the charismatic leader of Chavez, the current President Maduro repeatedly sought to return an additional 31 tonnes of gold still bolted to the Bank of England. The BoE is now refusing to transfer Venezuela’s gold adding to ridiculous legal objections, such as the fact that England has recognized Guaido as Venezuela’s “legitimate” (i.e. self-proclaimed) leader. The real reason is more likely the pressure exerted by the United States on his vassal in support of the demolition of Maduro and the installation of his Guaido puppet.
Despite the reasons though, the lesson here is that any nation-state
He should be aware that when push comes to push his opponents will use any leverage to weigh him. So leaving a physical reserve asset like gold with a foreign central bank is the most silly thing any nation-state can do. Remember “Not your keys not your bitcoin”, and so 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 states run this risk and trust the FED or the BoE?
They shouldn’t either.
Even the central banks of smaller nations will soon understand that bitcoin – at least for portfolio diversification – is a very attractive alternative to the old gold reserve asset. To avoid the risk of a vacant encounter like Venezuela, they could opt for a much slimmer and flexible solution. Buy bitcoins then, set up Xapo as a secure vault at the central bank to store the private keys in hard drives with air tape and you’re done. Your bitcoins will certainly be there when you need them. No counterparty risk, no custody and transportation costs, no certification and inspection costs, unreliable and independent.
Besides the needs of central banks’ reserves – on much broader terms – cryptocurrencies can also serve the geopolitical interests of states properly. You know, they become handy in all those shady areas of clandestine operations. Such as avoiding sanctions, funding color revolutions or gaps, supporting opposition political leaders in the enemy states, creating black budgets for denial operations and so on. There is no need to stash shipments of US $ 100 bills in aircraft and run Air America as a covert operation. There is no need to run laundering schemes like in the 1985-87 US-Iran-Contra deal. No more visible currency trails left by the likes of Victoria Nuland and her US corporate donors in Ukraine’s 2014 push. Just click and the political opponent of your choice has made sure the money in his wallet is ready to jump to the start of a revolution, P2P, immediately, no paths left (with the right piece of privacy of course). No doubt the secret government agencies already fully appreciate the features of cryptocurrencies.
Soon afterwards too the central bankers will join the criminals, the Wall Streeters and 007s for the party, it is only a matter of time if not.
#crypto #blockchain #bitcoin #monero #privacycoin #centralbanks
(c) www.bianconiandrea.com – 2020
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