Will the BRICS Embrace Bitcoin?

This is at least the thesis of the head of research at the investment firm VanEck. The BRICS are mining bitcoins

The BRICS are showing a keen interest in bitcoin mining, with several members actively engaging in the process.

According to Matthew Sigel, head of research at VanEck, the combined GDP of the BRICS now surpasses that of the G7. Among the new members, three are involved in bitcoin mining at the government level - Argentina, the United Arab Emirates, and Ethiopia.

While Argentina's membership in the BRICS is yet to be realized, its state-owned energy company YPF has indeed partnered with Genesis Digital Assets, an American miner, to utilize gas from oil fields that would otherwise be flared.

The sovereign fund of the United Arab Emirates has joined forces with Marathon, a bitcoin miner that operates 400 megawatts in Abu Dhabi, contributing around 3% to the global hashrate. Ethiopia, known for its vast hydropower surpluses, is also leveraging this energy resource for bitcoin mining.

Sigel further highlights Russia's involvement, stating that its sovereign fund will be investing in regional initiatives to build infrastructure for artificial intelligence and the bitcoin industry, with the goal of facilitating international transactions in bitcoins.

It's worth noting that the Russian Parliament recently voted in favor of a legal framework that is more conducive to the bitcoin industry. According to Anti Danilevski, CEO of the Russian exchange Kickex, Russia currently generates 17% of the global hashrate.

In an effort to counter sanctions, the Central Bank of Russia also launched an experimental platform for cryptocurrency payments, including bitcoin and stablecoins, in September.

However, Russia's enthusiasm for bitcoin is likely being expressed cautiously, awaiting the United States to officially embrace bitcoin before making any bold announcements.

Speaking of the United States

Bitcoin has been a topic of discussion during this presidential election. Both candidates, aware that tens of millions of voters are invested in bitcoin, have shown support for the cryptocurrency.

A victory this Tuesday, November 5, would be auspicious as Donald Trump has promised to create a “strategic reserve of bitcoins”. To be honest, he has mainly committed to not selling the 200,000 bitcoins that the government already holds (due to judicial seizures).

However, several Republican senators are preparing a bill aimed at building a reserve of one million bitcoins. Regardless, a Republican victory will very likely prompt many countries to seriously consider that bitcoin could become the reserve currency of the 21st century.

Let us recall that it is the only currency that exists in absolutely finite quantity, unlike gold. It is already mined two months of bitcoins for every ounce of gold (S2F ratio). It will even be four times less in 4 years, 8 times less in 8 years, 16 times less in 12 years, etc.

The stateless bitcoin has all the assets to facilitate international exchanges. The CEO of the miner Marathon said nothing else last week during a conference in Dubai:

“Why have two presidential candidates highlighted the notion of a strategic reserve of bitcoins [Trump and Kennedy]? For the same reason we have a strategic gold reserve. If bitcoin’s share of international transactions increases, which it will, it falls to the government to hold a large reserve of BTC in case we observe a boycott of the dollar by other nations”.

The greenback is no longer effective

The BRICS have the clear intention to get rid of the dollar. Let us recall that two member countries (Russia and Iran) have been disconnected from the SWIFT network. Not to mention the freezing of 300 billion euros and dollars belonging to Russia.

There is no doubt that the BRICS will eventually trade without the dollar. China and Russia, for instance, trade entirely in their national currencies and their own version of the SWIFT system (CIPS and SPFS).

That said, this system has its limits. We recently demonstrated this when Russia refused Indian currency as payment for its oil. The reason being that the rupee is a poor store of value and that India produces very little of interest for the Russian market.

In other words, the BRICS will not be able to avoid a universal store of value. Some countries will always have trade surpluses that will need to be placed somewhere, preferably in solid assets.

Gold played this role before the end of the Bretton Woods agreements in 1971. The problem is, it is very difficult to make payments in gold. It’s long and very expensive. In contrast, it is possible to conduct transactions of any amount for virtually nothing with bitcoin. These transactions are also instantaneous and can be done at any hour.

That the United States buys bitcoins first is probably the price to pay to finally see the emergence of a neutral international monetary system. In this system, bitcoin becomes the absolute and unseizable store of value par excellence. As in the days of the Gold Standard, it is about trading on equal terms, without “exorbitant privilege”.

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