The dollar remains strong and, despite a few crises, is still the world’s preeminent reserve currency. The euro, on the other hand – although it does represent a solid and advanced economy – has not managed to become a reserve currency capable of replacing the dollar. The currency “multipolarism” now emerging – difficult to construct yet certainly inexorable – is going to include the phenomenon of cryptocurrencies. The trend is toward a multipolar system with one dollar/euro area and another consisting of many of those currencies currently located outside that area.
Taking center stage at the moment in the wake of the Russia/Ukraine war is the situation of the ruble, not least in light of Western sanctions, whose efficacy is being assessed in various ways. From the standpoint of international balances, the prediction is for a Cold War 2.0, a period much different from the first that generated a bipolar scenario. The nuclear deterrent works and will continue to do so, but Putin’s aggression against Ukraine will increase the number of countries wanting to arm themselves with nuclear weapons.
From the economic standpoint, the freeze on Russian currency reserves is deemed an innovative and effective move. Indeed, it will be difficult for Russia to try to replace the funds frozen by the sanctions; opinions on the efficacy of blocking the SWIFT payment system are not unanimous. The fact is that Russia is not going to be able to develop a new payment system with China overnight; if it were so easy, the Russians would probably already have done it by now. For the moment, the Russian central bank and ministry of the economy have reacted efficiently and the ruble has returned to pre-crisis levels; capital exportation has been blocked utilizing the excess currency from raw energy materials exports whose prices have spiked. This is a near-term scenario though, while instead the impact of the sanctions on consumption, unemployment and high inflation will be a long-term one.
Even before the outbreak of the Ukraine war, Russia was already seeing the considerable dissemination of crypto-currencies that, if they have not already, could provide a way of circumventing the sanctions. Thus, the West is more and more anxious to regulate them. Those of today, in reality, offer a trove of information that become a public asset, to the extent that the monies of the past could be said to have been more “crypto” in comparison: bitcoin, virtual currencies and crypto-assets currently comprise a system paradoxically more traceable and transparent than in the past.
Cryptocurrencies are and will continue to be representative of a commercial, ideological, environmental and political community; take for example the donations for Ukraine made through this system, or the accumulation/use of tokens for reasons of sustainability, such as the purchase of an electric car. Businesses too are in favor but also want more regulation and a tidier and more trustworthy system.
The digital transformation has not eliminated currencies’ traditional relationship with power; on the contrary, it has strengthened it by introducing new and more subtle forms of power for geostrategic and commercial ends. The digital currencies promoted by the US and Chinese central banks are moving swiftly while the digital euro lags behind.
Europe is in the process of enacting a cryptocurrency legislation package valid for all 27 members, which will include laws on issuance, exchange rates, markets, the management of conflicts of interest and sanctions on insider trading. Ahead of these imminent European decisions, Italy must speed up its regulatory process, given that a legal bridge on the matter is still wanting. The United States, on the other hand, is way ahead of the game; Joe Biden recently signed an executive order on cryptocurrencies and digital assets with the goal of encouraging innovation while at the same time mitigating risks to consumers, investors and businesses as well as of reinforcing the US as a frontrunner in the global financial system.