From Harvard, Of All Locations, Comes An Endorsement For (Some) Central Banks To Hodl Crypto.
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Apparently, they don’t understand central banks, or they don’t understand Bitcoin, or they don’t understand either.
tldr; Matthew Ferranti, a Ph.D. candidate in economics, published a paper this month that says nations in danger of international sanctions could lessen the impact by squirreling away some cryptocurrency like Bitcoin. The model shows that Bitcoin, or other cryptocurrencies, could be viewed as a viable insurance policy against sanctions even when accounting for their volatility.
*This summary is auto generated by a bot and not meant to replace reading the original article. As always, DYOR.*
Recently(Jun 30, 2022), [the Bank for International Settlements (The Bank for Central Banks) allowed up to 1% of Bitcoin holding in Central Banks reserves](https://finbold.com/bank-for-international-settlements-to-allow-banks-to-keep-1-of-reserves-in-bitcoin/)
Holy shit is this guys work important to both the Russia thing and the FTX scandal! People need to read it!
Interesting parts from the thesis itself:
According to one model, “Even the most risk-averse investor holds 2-3% in Bitcoin.” if they want to compete.
He talks about modeling the risk with and without sanctions. Apparently he was researching this topic before the Russia/Ukraine situation, but now his thesis has more relevance. “Accordingly, this analysis addresses the question of how much Bitcoin a representative central bank might want to add to its existing reserve holdings in order to address its sanctions risk, without radically altering its existing holdings.”
On thing I didn’t know was this, “…central banks tend to underreport their gold holdings to avoid criticism when the price of gold declines” and similarly, “If a central bank does decide to purchase cryptocurrency, the central bank faces a choice of whether to publicly reveal that decision. Choosing to conceal the central bank’s Bitcoin allocation might further stymie external attempts to freeze the central bank’s assets.” For example, many central banks do not tell the public what their fiat reserve composition is. “Revealing the central bank’s cryptocurrency wallets enables public verification of the central bank’s assets, but requires the central bank to accept scrutiny regarding its choice to invest in a highly volatile asset.”
Isn’t Coinbase and Greyscale going through similar issues right now? Proof of reserves seems to be a plague affecting everyone these days!
Holding Bitcoin as a reserve is a lot easier than gold
After the puff-piece on FTX, Alameda and their respective CEOs, Forbes doesn’t miss the opportunity to sneak the word “crypto” in the title of one of their articles even when writing about a paper that is clearly focused on exploring the potential for Bitcoin to serve as an alternative hedging asset.
And that, ladies and gentlemen, is mainstream media for you.