Russian MP Proposes a Gold-Backed Cryptocurrency, Central Bank Head Concurs
Opposes nothing-cryptos, but will study the proposal for a gold-backed one
Editor’s note: The Russian MP has the right idea here. Gold has always been money, especially in world trade. On that timescale the Federal Reserve notes era since 1971 is just a blip which once it ends will be recognized as a mass delusion and the result of madness of crowds, a global Tulipmania only with far, far greater consequences.
It is good to hear Nabiullina is not opposed to the idea at all but promises to explore it. She remains more focused on national currencies, however, which is a mistake. Ultimately you don’t want to be holding your wealth in any paper that can be printed at all, but Central Bankers have an incentive not to go the way of gold-backed currencies.
To do so would impose harsh fiscal austerity on them, and greatly reduce their ability to help politicians with deficits, diminishing their societal prestige. They would go from monetary wizards and high priests to glorified warehouse clerks watching over the gold.
The Central Bank of Russia (CBR) is studying a proposal to create a gold-backed cryptocurrency, which could be used for cross-border settlements with other countries.
The bold proposal was made by Russia’s State Duma member Vladimir Gutenev. He has suggested initiating discussion to set up national cryptocurrency, denominated in gold.
Commenting on Gutenev’s proposal, the head of CBR Elvira Nabiullina said: “As for mutual settlements, we will consider, of course, a proposal on a cryptocurrency that is tied to gold. But, in my opinion, it is more important to develop settlements in national currencies.”
Gutenev explained that, unlike ordinary cryptocurrencies, which are not secure because they are not backed by anything, gold-backed cryptos have their value tied to a real asset. They would come in the form of a so-called stablecoin which is a type of cryptocurrency but offers price stability characteristics.
“[The CBR], in principle, are opposed to cryptocurrencies being launched into our monetary system. We do not see the possibility that cryptocurrencies, in fact, fulfill the function of monetary surrogates,” Nabiullina said. She noted, however, that the regulator could study the possibility of creating stablecoins while there is a real asset behind their provision.
Nabiullina said last month that Russia’s gold and foreign exchange reserves will soon top $500 billion. Such a volume of gold bullion and foreign currency holdings is enough to tackle crisis-like episodes, she explained.
Boosting gold reserves in order to diversify foreign exchange and reduce reliance on the US dollar, has, of late, been part of Russia’s national policy. The central bank reported in May that gold holdings amounted to nearly 492 billion rubles against the 487.8 billion recorded at the end of March.
The World Gold Council said last month that Russia had secured the top position among the biggest global purchasers of the yellow metal in the first quarter of the current year. According to its report, Russia added 55.3 tons to its vaults [this year], bringing its vast gold reserves to 2,168.3 tons.