A Harvard University study explained how central banks can protect against financial sanctions by fiat issuers using Bitcoin (BTC).
PhD candidate from the economics department of the university Posted by Matthew Ferranti The research titled “Hedging Against Sanction Risks: Cryptocurrency in Central Bank Reserves” addressed the potential of Bitcoin as an alternative hedge asset for central banks to combat possible sanction.
Ferranti suggested that it is beneficial for central banks to hold some Bitcoin even under normal conditions. The researcher thinks that it makes sense to allocate more shares to Bitcoin, along with gold reserves, when there is a risk of sanctions.
The researcher drew attention to the fact that the countries that face the risks of sanctions from the USA grow their gold reserves more than the countries that have a low risk of sanctions. If the central banks of these countries cannot find enough gold to protect against sanctions, Bitcoin could be a viable alternative, according to the researcher.
Ferranti also thinks that the risk of sanctions may ultimately increase diversification in central bank reserves. This could also strengthen the value of gold and crypto, according to Ferranti. Ferranti concludes the research by addressing the significant benefits of diversifying reserves and incorporating both Bitcoin and gold.