These are unprecedented times for investors. A deadly pandemic has shook the world. Europe is at war, and Russia has a financial stranglehold on the continent. The United States is experiencing the highest inflation rate in 40 years, and it is expected to worsen. Currency and equity markets are experiencing unprecedented volatility. The traditional geopolitical order’s status quo is in jeopardy. Commodities are trading similarly to meme stocks.
Cryptocurrencies are becoming more popular. Five years ago, the market was worth only $14 billion, a mere fraction of what it is now. The US government, among others, is attempting to capitalise on the digital asset boom by attempting to regulate and reinvent a sector that is largely beyond its control.
On Wednesday, US President Joe Biden signed an executive order requiring the government to evaluate the costs and benefits of creating its own central bank digital currency.
While CBDCs are inspired by cryptocurrencies and follow some of the same principles, they are not considered crypto because they are regulated by a central authority. The White House will also look into mitigating cryptocurrency risks for consumers, as well as leading economic and technological competitiveness and innovation in the country.
During the Beijing Winter Olympics last month, China debuted its version of a CBDC, the digital yuan. According to the Pew Research Center, 16% of Americans have dabbled in cryptocurrency trading, use, and investment. According to crypto industry insiders, that figure is likely to rise significantly.
The United States and its allies have sanctioned Russia in response to Russian President Vladimir Putin’s decision to invade Ukraine.
Over the weekend, the world’s largest credit card networks, Visa and Mastercard, as well as internet payments giant PayPal, announced that their services in Russia would be suspended. This means that Russian banks’ credit and debit cards will no longer work outside of Russia. Russian businesses will also be unable to accept cards issued outside of the country.
Russians are also barred from using SWIFT, an international bank messaging system that is critical for transactions. Russia’s central bank’s assets have been seized, and hundreds of companies in the technology, oil, media, and consumer goods sectors have withdrawn from the country. The rouble hit an all-time low last week.
If your engagement in the global financial system is contingent on the appeasement of the United States and its allies, and if you are not in good standing with those people, they kick you out of the system, you may want to look for another global financial system to participate in.