Due to the economic consequences resulting from the sanctions, Russia has started to work on a new monetary and financial system for the country.
Q1 2022 hedge fund letters, conferences and more
VEB.RF has suggested to the Russian government the idea of creating a gold-backed stablecoin dubbed “ the golden ruble.” VEB.RF believes that a gold-backed ruble stablecoin will allow Russia to evade Western sanctions.
What Is A Gold Stablecoin?
A gold stablecoin is a tokenized digital currency pegged to gold. For example, Pax Gold (PAXG), a trusted and popular stablecoin, stores gold in vault facilities. Each token stored in said facilities represents 1 troy ounce of gold. The owner of PAXG has ownership of the gold, which is under the custody of Paxos Trust Company.
Similar to PAXG, the golden ruble token would be pegged to Russia’s gold reserves.
Why Does Russia Want A Gold Stablecoin?
Gold has been used for centuries as money and a store of wealth. During inflationary financial cycles, individuals and institutions look to gold as a hedge against inflation.
A gold-backed ruble stablecoin will allow Russia to peg the international gold rate instead of a fiat currency like the ruble or dollar. The digital currency would also allow other countries to exchange this currency amongst themselves without Russia’s participation in transactions.
Using gold as a gold-backed currency will help strengthen a nation's currency against devaluation and becomes more attractive to foreign countries and investors as a world reserve currency.
Several Financial Systems Will Also Be Included
VEB.RF believes that introducing a hedging system to minimize currency risk with other countries’ digital currencies is necessary. In addition, VEB.RF suggests that a new financial system could include new offshore zones and a large-scale bartering scheme.
VEB.RF’s report also highlights a blockchain system that will incorporate a BRICS framework, similar to the special drawing rights system within the IMF.
The report also shines a light on Russia’s SPFS interbank messaging mechanism and MIR payment system. It suggests that Russia should continue to expand the systems outside the country with partner nations.
Conclusion
The introduction of a central bank gold stablecoin is the beginning of a new monetary order, similar to the Bretton Woods Conference, which established the monetary order we use today. If Russia creates this new digital currency, other countries like the US would have to create a currency system if it wishes to maintain the status of the US dollar as a world reserve currency.
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