It sounds like a thrilling drama, even if it is about banking, but today’s news that the Bank of England (BoE) is denying Venezuela access to its gold reserves certainly has the makings of a sensational story, fuelled by increasing US sanctions. And it also points to the value of crypto assets, which could have saved Venezuela from being shut out of its own gold reserves.
Venezuela asked the BoE to repatriate 14 tons of gold, valued at about $550 million, but there are fears that Nicolas Maduro, president of the United Socialist Party of Venezuela and the country at large will liquidate the gold for private gain. So, the BoE has said no. In more normal circumstances, the gold is state property and most governments would use it to help back a failing currency, but the Venezuelan government is terrified that US sanctions could result in freezing the gold, or even seizing it.
It is no coincidence that this news comes hard on the heels of President Trump imposing more sanctions on Venezuelan gold. This executive order doesn’t apply to the UK, but given the special relationship between the UK and USA, it appears that US government policy has a strong sway.
CCN also points out that it is quite surprising that Venezuela has so little in the way of gold reserves. Of course, they may have a stash hidden elsewhere. However, as the country has responded to it economic problems by printing more money and therefore creating a projected 1,000,000 percent inflation rate, it is just as likely that what is in the BoE is all that Venezuela has.
Sovereign states can be denied access to their own funds. That is why crypto assets have such a strong appeal, as they cannot be controlled in this way. CCN says: “The tired out phrase “be your own bank” shouldn’t even need to be advertised to a government of any legitimacy, but in the case of Venezuela, it would have served them well to have done so.”
Another way of looking at this case is that if the BoE just hands the gold back to Venezuela, it won’t help the country that much. The UK regulatory fears that Maduro might be out to steal the gold could be true, however, if they were digital gold reserves tied to smart contracts, he wouldn’t be able to do that.
Other countries that may end up in the dire economic circumstances that Venezuela is facing could protect themselves against such an outcome by exploring new ways to store and invest in digital assets, although not in the way Venezuela has with its Petro cryptocurrency. As CCN’s op-ed piece concludes; all the US sanctions have done is ensure that a new generation of Venezuelans grow up “with an undying hatred of the US and our foreign policy,” — whereas digital assets could have helped prevent this.