The process of canceling the Russian economy on February 26, 2022, officially ended the “Bretton Woods period.”
Many countries will be compelled to reassess their holdings of US dollars or US Treasury securities. The reason for this is that Russia has over $600 billion in US dollar-based reserves in other nations, half of which, is now unavailable to the Russian government or the Russian Central Bank.
Russia was essentially kicked off SWIFT!
The concept of excluding a whole country from that system is novel. You create a dilemma for a nation when you cut off the backbone of global capitalism.
This is where decentralized technology is likely to come out on top.
Bitcoin and Cryptocurrency
An Asset Held in Reserve
Gold might become the preferred reserve asset over dollars. But do you get things done on a global scale? Bitcoin is simple to transport in real-time from one location to another, whether on a large or small scale.
As more gold investors learn that bitcoin is a more convenient form of gold to own, controlling its position as a viable alternative will become feasible. When the price of bitcoin rises owing to ongoing strong network effects, its position as a gold substitute will be cemented. As a result, bitcoin will eventually become a crucial global reserve asset.
Central Financial Authorities
The West lives in a democracy, but the financial departments have dictatorial powers. For decades, the US Treasury Department has been penalizing foreign countries and people unilaterally.
People and governments will eventually begin to doubt the sustainability of US dollars and Treasurys as reserve assets, and they will wonder if transferring US dollars via SWIFT or an equivalent is the best method to transact when the financial system may be used against them.
The continued usurpation of centralized financial power is unsustainable. It leads to a debate on fungibility and privacy coins as a form of insurance against authoritarian regimes or choices.
We should not be surprised if the targets move to decentralized systems meant to be trustless and without intermediaries to avoid the penalties. Bitcoin, may, of course, help to bypass penalties. Bitcoin is only software. It is unconcerned with penalties or governments. It simply runs. That’s exactly what it’s meant to accomplish.
Centralized Financial Power
Promoting Decentralized Finance
For the most part, decentralization is showing itself as bitcoin and Ethereum: bitcoin as the future of money and Ethereum as the future of finance and decentralized computing.
Ethereum’s value will increase as it strives to become a decentralized financial stack. This takes the shape of NFTs, Defi, staking, and other services.