Despite recent news reports to the contrary, not all central Banks are against the concept of cryptocurrencies. In April, BBS released a report showing that several blockchain technology projects led by central Banks are under way to support the central bank's digital currency. However, the financial media only reported on three projects in venezuela, Russia and Iran. The general theme is that cryptocurrencies could form a new financial network, free of American sanctions. Today's news is that Iran has launched its own national cryptocurrency, a stable currency backed by gold.
A revelation came in April, when BBS reported that several cryptocurrency projects were under way, driven by central Banks. At the time, reports said: "Canada, the UK, Singapore and France appear to be struggling to find ways to deploy distributed ledger technology to achieve efficiency in their operating environments." The main effort seems to focus on the possibility of central-bank digital currencies, which are managed by the central bank and can be "exchanged for their own domestic fiat currencies". Sweden and South Africa also make the list.
As for the "big three", as the media call them, venezuela went down this path years ago, when the government issued encryption tokens known as "petrodollars", which were somehow backed up by the country's oil reserves. The project never got off the ground and some observers believe the whole thing is a major hoax. Its initial aim was to circumvent us sanctions, but its ability has never been tested. One critic said:
For other countries, petrodollars are a case that should not be followed.
Then the focus turned to Russia and Iran. Presumably, the two countries have been discussing developing a mutual cryptocurrency system, which would once again provide a way to circumvent us financial sanctions that block their access to the global interbank financial telecommunication association financial information system. About a year ago, Mr. Putin was said to have been very interested, but then lost interest. The project is still on the back burner.
Not to be outdone, however, Iran continues to develop its own central bank digital currency behind the scenes. According to a news report: "on Saturday, July 13, tehran-based Mehr news agency reported that the country's first cryptocurrency approved by Iran's central bank is about to be launched." Shahab Javanmardi, an official with the Iranian association of business, industry, mining and agriculture, a non-profit organization that aims to boost the country's economic growth and development, gave more details.
"Under the Iran central bank agreement, a consortium of private Iranian IT companies will mine Iran's own digital currency;
Iran's cryptocurrency is backed by gold, but its functions are similar to those of foreign cryptocurrencies;
Domestic cryptocurrency is to make better use of the frozen resources of Iranian Banks."
The dollar is now the world's "reserve" currency because of the stability and reliability of the us economy and its management infrastructure. Major commodities and trade credits are denominated in dollars. Generally speaking, a country must keep two months 'worth of dollars in reserve based on current trade data to trade with other countries. For these and other reasons, the U.S. government can influence policy decisions in other countries, but opposition has grown louder over the past decade. After decoupling from gold, the dollar suffered a long period of depreciation. Massive increases in debt and deficits will only exacerbate the current situation.
While the debate over the status of the us reserve currency continues, the development of cryptocurrencies has coincided with an apparent need for currencies other than the dollar as a better store of value from central Banks. Last week the foundation for the defence of democracy, a right-wing think-tank in Washington, dc, published a report informing American policymakers that national cryptocurrency programmes such as the central bank's digital currency could pose a threat that could nullify American sanctions.
The report takes a comprehensive look at issues related to central bank digital currencies and trade agreements and concludes that:
Therefore, Washington must understand the pros and cons of new financial technologies, maintain the integrity of global finance, and develop the expertise and influence to participate in the emerging international cryptocurrency race.
Cryptocurrency advocates speculate that the FDF report is a thorn in President trump's side and the reason behind his recent statements against cryptocurrencies and twitter. In any case, a new kind of currency war could be on the horizon, with cryptocurrencies at the forefront. Things will get more interesting.