Soon A Russian "strategic Reserve Of Bitcoins"?

The Russian government has stepped into the bitcoin industry. This support is likely not unrelated to the ambition to create a fairer international monetary system.

Russia bets on bitcoin

The growth of the Russian bitcoin industry now surpasses that of the United States, according to Igor Runets, CEO of BitRiver.

“Last year, we caught up with the United States in terms of growth rates, and the absolute gap is narrowing,” he told local media.

According to him, the Russian industry could surpass that of the United States in the next two or three years. This growth is facilitated by recent laws that encourage oil and gas companies to partner with bitcoin miners.

Bitriver manages 21 facilities scattered across Siberia. Ten more locations are under construction. According to the CEO of the Russian exchange Kickex, Russia would already represent 17% of global hashing power.

For comparison, note that the share of the United States is around 35%:

“The combined hashrate of the 14 publicly traded American miners has increased by about 70% since the beginning of the year (+80 EH/s) to reach 194 EH/s. This is faster than the global increase of 33% in hashrate. These miners now account for nearly 29% of the global hashrate,” can be read in the recent report from JP Morgan.

The perception of Bitcoin by Russian authorities is so positive that BitRiver has just announced a partnership with the Russian Direct Investment Fund (RDIF) during the last BRICS summit.

This agreement superficially discusses data centers that will support the deployment of artificial intelligence within BRICS, but Bitriver is a company dedicated 100% to the bitcoin industry.

It is therefore hard not to see here a BRICS goodwill towards bitcoin. The sharing of experience by Bitriver with BRICS is all the less surprising as the United States is about to create a “strategic reserve of bitcoins”:

WE ARE GOING TO BUILD A STRATEGIC BITCOIN RESERVE 🇺🇸 🇺🇸 🇺🇸

— Senator Cynthia Lummis (@SenLummis) November 6, 2024

The failure of the Russian central bank

It was written in advance that Russia would turn to bitcoin. Indeed, let us recall that Russian banks have been disconnected from the SWIFT network and that the approximately 300 billion euros and dollars in foreign exchange reserves of the country have been seized.

According to the surveillance company Chainalysis, Russia is using bitcoin to circumvent Western sanctions. President Vladimir Putin recently signed a law allowing Russian companies to conduct international transactions in bitcoins, under the supervision of the Russian central bank.

This blank check comes as the efforts of the central bank have not yielded the expected results. On one hand, the digital ruble (CBDC) is faltering now that the Bank for International Settlements has withdrawn from the mBridge project. And on the other hand, its system SFPS analogous to the SWIFT network is also struggling.

These failures are due to the fact that the United States threatens foreign banks with the closure of their dollar accounts if they connect to the SFPS network. Succeeding in convincing the major BRICS banks and the rest of the world will take time.

But unless Europe and the United States return the 300 billion to the Russians, alternative monetary systems like bitcoin will continue to thrive. This is essentially what the Russian president stated this week during a discussion forum organized by the Moscow think tank Valdai Club:

“We are not abandoning the dollar. It is the United States that refuses to let us use it. It is foolish of them, considering that the dollar is the pillar of American power. Its use as a means of payment is not declining much, but its role as a reserve currency is gradually decreasing…. Our proposals are not directed against the dollar. They simply reflect our adaptation to the modern world. We are thinking about the payment tools of the future.”

JUST IN: 🇷🇺🇺🇸 President Putin says Russia is not abandoning the US Dollar. pic.twitter.com/zsNsCyHN53

— BRICS News (@BRICSinfo) November 7, 2024

Bitcoin, the reserve currency of the future

The United States seems to have understood this. Washington knows that the share of the dollar in global foreign exchange reserves will inevitably decline. The BRICS will not go back. Exchanges will eventually take place on an equal footing among great powers.

In short, the United States will have to come to terms with reducing its trade deficit; otherwise, the dollar will collapse in the face of the refusal of major exporting nations like China or Russia to place their trade surpluses in Treasury bonds.

The economic program of Donald Trump goes in this direction. We can read:

“We will prioritize American producers over foreign subcontractors. We will bring our essential supply chains back to our country. Our trade deficit exceeds one trillion dollars a year. We will impose tariffs on products made abroad.”

Republicans know that the exorbitant privilege of enjoying a chronically deficit balance cannot continue without consequences for the greenback.

The world is heading towards a more neutral monetary system. The dollar, euro, yuan, and SWIFT network will continue to claim the lion’s share, but alongside alternatives. Gold is one such alternative, and record purchases by central banks are a reminder of this.

However, a modern alternative is beginning to emerge. Bitcoin has immense advantages. The first is that it exists in finite quantity (whereas more and more gold is mined every year). It is an absolute store of value, an essential attribute of a worthy reserve currency.

Moreover, Bitcoin is a payment network as well as a currency, a two-in-one solution. Transactions are almost free and instantaneous, among other advantages.

Only China remains to change its stance. In the meantime, the old continent remains the laughing stock due to the Brussels and Frankfurt technocrats.