“Shooting in the foot” – sanctions against Russia could accelerate Bitcoin adoption, says IMF
“Financial sanctions imposed on Russia for its invasion of Ukraine could result in the reduction of US currency dominance,” according to the International Monetary Fund (IMF). “Confrontation could lead to the fragmentation of the current world monetary system”, warned the main representative of the institution.
According to Gita Gopinath, the IMF’s first deputy managing director, the unprecedented financial sanctions measures could gradually diminish the US dollar’s dominance, with countries and economic blocs looking for alternatives to keep supply chains and local economies alive.
Speaking to the Financial Times, the deputy director of the IMF also warned that the restrictions could encourage the emergence of small currency blocs based on trade between groups of nations.
“We are already seeing this with some countries renegotiating the currency in which they are paid for trade.”
The Russian Federation has been trying to reduce its dependence on the US currency for years, especially after the United States imposed sanctions for the annexation of Crimea in 2014. Russia is pushing “de-dollarization”, Vice Chancellor Alexander Pankin said in a statement.
With the lockdowns tightening after a Russian military attack on Ukraine, officials in Moscow have expressed interest in using cryptocurrencies and are even ready to accept bitcoin for energy exports, along with the Russian ruble.
Russia had approximately a fifth of its reserves in dollars, allocated in several countries that are now endorsing trade and economic sanctions, causing reserves to be threatened and seeking more creative solutions, such as the adoption of bitcoin.
Gopinath noted that the increasing use of other currencies in global trade would lead to greater diversification of reserve assets held by central banks. “Countries tend to accumulate reserves in the currencies that they trade with the rest of the world and in which they borrow from the rest of the world, so you can see some slow trends towards other currencies playing a bigger role,” he said.
The IMF pointed out that the dollar’s share of international reserves has fallen by 10 percentage points, to 60%, in the last two decades.
The deputy director believes the war will also boost digital financial assets, from cryptocurrencies to stablecoins and central bank digital currencies (CBDCs). “All this will gain even more attention after recent episodes, which brings us back to the issue of international regulation. There is a gap to be filled there.”
In this way, the dollar’s monopoly is threatened, which could diminish the importance of the United States in the global scenario, marking a new era of international relations.