Countries are turning to cryptocurrencies so they can avoid US trade sanction. Venezuelan government led by Nicolás Maduro has already tried two times to make a deal in digital currency. Maduro launched a state sponsor crypto petro to evade US sanctions, but that plan did no work for him.
According to Spanish publication ABC, Maduro ployed a scheme to convert payment for airline taxes into Bitcoin and eventually to dollars. The report cites its sources who believe that government officials use digital wallets to transfer the digital currency to exchanges in Hong Kong, Russia, and Hungary, where they exchange to dollars and then transfer the cash into government’s account. This strategy helps them to avoid sanctions that block Venezuelan based accounts from dollar-based systems.
Countries like Iran, Russia, Ukraine who face US sanctions may soon join Maduro to use cryptocurrencies to get out of US reach.
US dollar is among the most of power currency in the world, as it is used to by countries all over to participate in international trade. Because of this, the US government has leverage over other countries as they can cut access to dollars in a time of conflict. Foundation for Defense of Democracies’ report says that for decades, there has not been an alternative option of avoiding the US-led global financial system, but with blockchain technology, an alternate is developing.
In FDD report, authors have focused on four countries who are exploring blockchain to get “dollar’ out of the way entirely to trade around the world. In addition to Venezuela, Iran, China, and Russia are looking to avoid the dollar. Unlike Venezuela, China is among leading countries to explore blockchain technology. These countries have the potential to trade worldwide with cryptocurrencies successfully, but as of now, it is highly unlikely.
FDD’s report has been described by many as “hawkish,” but the actual report is based on government statements. Let’s take a more in-depth look at all four countries who already might have started using cryptocurrency to avoid dollars.
“Internet belonged to America, blockchain will belong to Russia.”
The Russian government is prioritizing blockchain development not just to lessen the impact of US sanctions but to strengthen their national security. In 2017 25 countries met in Tokyo to work on setting international standards for the blockchain. During the conference a former KGB member said, Internet belonged to America, but blockchain will be ours. Vladimir Putin also has acknowledged the power of cryptocurrency and blockchain. He previously said that Russia should work on blockchain technology to avoid “various limitations” in the global finance trade. Russia’s National Security Depository has been testing blockchain for quite some time. Russian Central bank also proposed an idea of using a blockchain and perhaps a digital currency to build a new payment system for use by members of the Eurasian Economic Union. Overall Russia can play a vital role to make global trade dollar-less.
Iran’s Central bank proposed to launch a state-backed cryptocurrency.
Several reports suggest that Iran is looking to develop its own digital currency to avoid US sanctions. Earlier this year it was in the news that Iran is in negotiations with eight other countries over the use of a cryptocurrency to “circumvent US-led sanctions. In FDD report, Iran is described as Russia’s strong ally in the plan for blockchain resistance.
China best placed to drive blockchain resistance
With the current trade war between China and the US, the idea of using blockchain and crypto might not be too out of reach for the Chinese government. It is fair to assume that displacing the US influence over global trade is among China’s national priority, and cryptocurrency might just be the way. Among all other countries, China possesses the necessary technology to create a blockchain system that could compete with the dollar-dominated trade.
The People’s Bank of China has been studying digital currencies since 2014 and had already warned that it is inevitable to curb down the growth of blockchain and cryptocurrencies.
What if countries succeed in this?
If any country manages to create a system that could undermine the value of dollar-based trade, its implications on US economy is hard to determine as of now. The current debate about crypto and blockchain in US politics is yet to bring this point up. It is most likely that these nations are already experimenting with an alternative financial system that does not involve dollar.