Forex in this article
Cyber currencies as currency flight?
Golden times for cryptocurrencies?
Blockchain transparency?
The turmoil in the financial market, dictated by the conflict between Russia and Ukraine and the Russian invasion of Ukraine, has made cryptocurrencies appear as a “safe haven”. The sanctions against Russia served to isolate Russia in the financial market and cut it off from the banking system. It has been observed that the volume of transactions between the Russian ruble and cryptocurrencies, most notably Bitcoin, has skyrocketed.
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Blockchain transparency
Since trading on the Moscow stock exchange has been suspended and the ruble has lost massive value, the question arises again and again as to whether Russia could not use cryptocurrencies and thus circumvent the sanctions imposed.
Some Russian investors will certainly try to invest in cybercurrencies such as Tether, which is tied to the dollar, according to Coinbase CEO Brian Armstrong. A currency flight could succeed so individual. However, with the assets of Russian oligarchs frozen, this seems less likely. Under pressure from Washington, several thousand crypto accounts of Russian oligarchs have been blocked in the meantime, but most of them were probably spared, Hanna Halaburda from New York University told Tagesschau.
Vijay Ayyar from the crypto exchange Luno sees it as central that the volume of crypto currencies only accounts for a small part of the currency market. It is therefore difficult to move large fortunes in cryptocurrencies.
Experts, including TRM Labs, rule out that the Russian state will manage to circumvent sanctions by investing in cryptocurrencies. There are two reasons for this: Firstly, the blockchain itself and the transparency of the technology on which it is based. All transactions are stored as blocks in the publicly accessible database. This chain of stored blocks is considered to be forgery-proof, since all transactions are checked by the central network and the information is stored in encrypted form.
“The biggest misconception about cryptocurrencies remains that they are untraceable and primarily used for nefarious purposes,” Ayyar told CNBC.
On the other hand, Russia simply does not currently have the liquidity to be able to invest heavily in cryptocurrencies.
The comparison with the gold
Initially, Bitcoin was seen by many as a store of value, a “safe haven” in times of crisis. However, the image of bitcoin as “digital gold” is flawed, since trading in the digital currency also correlates with risky investments. Answers to the question of how cryptocurrencies will be treated on the exchange in the future – as securities or as commodities – are expected from the ruling in the Securities and Exchange Commission’s lawsuit against Ripple in early April.
With the Ukraine war, however, Bitcoin experienced an upswing with huge jumps in value. Some see the decoupling of Bitcoin from stocks and gold as a positive indication, such as Ayyar from the crypto exchange Luno. Others disagree as cryptocurrencies sold off after the Fed aggressively announced interest rate hikes much earlier. “That’s not the definition of a safe haven,” says Lux Thiagarajah of the BCB Group.
Promise of Blockchain
Due to the Ukraine war, the demand for alternative, decentralized transaction systems has skyrocketed. The Ukrainian government also decided to accept donations in the form of cryptocurrencies. In this way, Ukraine has already been able to collect over 60 million dollars in donations, according to the Tagesschau. With transfers in the existing banking system, this would have been impossible in such a short time and would have involved much higher transaction costs. It must be noted at this point, however, that not all cryptocurrencies can be transferred en masse and that the costs and speed can be high.
Garrick Hileman from the London School of Economics states that in the current global political situation, cryptocurrencies only make transactions possible with the help of computers and the Internet if the critical infrastructure is gone. In addition, transparency is guaranteed to a certain extent through the use of a distributed ledger. As Hileman sums it up, “Some of the original values of cryptocurrencies are being confirmed.”
Editorial office finanzen.net
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