Bank Of England Blocks Venezuela From Its Gold Reserves As Bitcoin Volume Continues To Soar
U.K's Bank of England has reportedly told Venezuela's government that it cannot access about 14 tons of gold held with the bank, currently valued at $540 million based on today's value of $1,203 per ounce.
U.K’s Bank of England has reportedly told Venezuela’s government that it cannot access about 14 tons of gold, currently valued at $540 million based on today’s value of $1,203 per ounce.
Caracas has been reportedly in a rush to repatriate the gold back to Venezuela, but UK regulators are concerned that there are no guarantees that the funds won’t end up into the personal coffers of Nicholas Maduro.
Venezuela is struggling under the weight of a biting economic crisis exacerbated by a global record in inflation and widespread criticism that the government has continued to make the situation worse.
With the economy dwindling, Venezuela has sought other means of eliminating its dependence on US-controlled financial instruments, including efforts like issuing a national cryptocurrency failing to remedy the situation.
With Petro Coin failing, the country’s authorities began trading in other currencies like the euro and yuan to avoid the U.S dollar.
Before these measures, Maduro’s government has for the last three years relied on its gold reserves as collateral, allowing it to access loans worth billions from global lenders.
In 2017, the U.S government banned financial institutions from engaging in swap arrangements with Venezuela, making it tougher for Caracas to finalize financing agreements.
Amid this decline, Bitcoin has emerged as an alternative for most of the population, with trading volumes hitting record highs on exchanges, and reports indicate that the Venezuelan authorities hoped to have the U.K central bank release the gold before U.S-led sanctions make it virtually impossible.
Bank of England’s moves to block gold reserves
In all rights, the gold being held in the U.K belongs to Venezuela and should not be blocked. But the economic crisis in Venezuela and the high corruption and accusations against the top leadership have complicated the matter.
U.S president Donald Trump’s administration recently imposed additional sanctions against Venezuela, including on its gold reserves.
That has given rise to fears within Maduro’s administration that the sanctions may lead to the freezing of the country’s gold reserves, hence the move to have them repatriated back home.
However, Bank of England’s move to block access to the gold complicates things for the crisis-hit country.
There are one or two things that stand out from this. One of the first questions is whether, even with access; the $540 million worth of gold would be enough to bring meaningful remedy to the economic situation. Unless the country has more reserves held elsewhere, the situation is therefore set to get worse.
The second question is why a sovereign state should be blocked from accessing money that rightly belongs to it.
In this case, would Bitcoin (BTC) have helped the affected country? Suggestions are that it would have been the best alternative, with the underlying bitcoin technology being censor-proof and not controlled by any centralized body that may decide at its whims, to deny users access.
Bitcoin’s financial libertarian streak is a strength that makes the digital gold appeal even to those who initially criticized it and called it ‘stupid.’ Its value in economic freedom is immeasurable and incomparable to the deficiencies of fiat and even gold.
Bitcoin would provide a hedge against predicament
The U.K authorities may be right in harboring fears of how, or if at all, the gold would end up in the right hands. But such concerns would not surface with bitcoin.
Blockchain technology and cryptocurrency would have offered transparency- especially if the transfer were tied to a smart contract. Blockchain’s immutability and smart contracts’ robustness would help ensure that all the digital gold wasn’t utilized illegally.
So, as Venezuela grapples with the current predicament that could worsen its financial crisis, it is perhaps an opportunity for such governments to look at the emerging technology.
It’s even more poignant for Caracas, as Bitcoin would be a perfect hedge against the current predicament, perhaps a more plausible crypto venture than the doomed oil-backed Petro coin.
It is true that Bitcoin’s volatility may count against it as a store of value, as its price has declined since January. However, an investment made three years ago would still be worth much more at current prices. Further, Bitcoin’s volatility has been incredibly low as of late.