Research is underway by the Central Bank of Russia (CBR) to develop a cryptocurrency backed by gold. This cryptocurrency would be used for international settlements and would see the return of the gold benchmark.
In a recent press release, stated that Vladimir Gutenev, a member of the Russian State Duma, had submitted plans for this project in August 2018. As a follow up to the submission, talks have continued. Head of the CBR, Elvira Nabiullina, made a public announcement that while the CBR was giving serious consideration to the project submitted by Gutenev, the prime objective of the CBR is to ensure that all settlements are made in the national currency.
Gutenev views gold as the most reliable metal and would provide a secure backdrop to his proposal of a gold-backed cryptocurrency. In general, buying cryptocurrencies and online crypto trading are seen as being risky as they do not have the guarantee of anything stable. By linking the cryptocurrency to gold, which is seen as an actual strength, the stability of the price will be guaranteed.
Future of Gutenev’s proposal
In a further report, RT.com shared the views of the CBR with readers. In the report, Nabiullina is quoted as saying that in essence, the CBR is not in favor of the establishment of cryptocurrencies in the financial systems of Russia.The purpose of cryptocurrencies could not replace financial proxies.
The proposal by Gutenev has not been entirely shelved by the Central Bank of Russia and they will, going forward, be looking at introducing stablecoins. A stablecoin is a cryptocurrency linked directly to an astable asset, for example, gold or even the US dollar. This condition was included in the Gutenev’s proposal of a gold-backed cryptocurrency.
An official of the CBR indicated that Russia’s forex and gold assets would soon exceed $500 billion.
As the Central Bank of Russia looks to minimize its dependence on the US dollar, it is looking at increasing its gold bullion stock. These reserves, both foreign exchange and gold, would be used to handle any crisis that may arise. In May 2019, the value of the gold assets of the CBR totaled nearly $492 billion.
Russia ranked amongst the highest international buyers of gold in the first quarter of 2019 as they increased the amount of gold held in safekeeping by 55.3 tons.
Gold-backed cryptocurrencies elsewhere in the world
In recent developments, Iran has introduced a gold-backed cryptocurrency known as ‘PayMon’. Little is known about this platform, but it is understood to be based on the XLM blockchain and will only be used for trading in special exchange offices.
Earlier reported that four Iranian national banks and a company known as Ghoghnoos were working with the Iranian authorities on the introduction of the PayMon system. With Iran under sanctions by the United States, urged on by current President, Donald Trump, PayMon would offer an avenue for Iran trade which circumvents these sanctions.