As the Russian invasion of Ukraine enters its second month, the head of the International Monetary Fund (IMF) has warned that the financial sanctions placed on the invading country, including limits on its central bank, might have a broad impact on currencies.
Gita Gopinath, the IMF’s first deputy managing director, thinks there are signs that some countries are “renegotiating the currency in which they are compensated for trade,” she said in a Financial Times interview cited by Insider on March 31.
“Even in such setting, the dollar would remain the dominant global currency,” she stated. “However, fragmentation on a lesser scale is clearly plausible.”
According to Gopinath, the present environment may boost the global adoption of alternative currencies to the US dollar, including cryptocurrencies ranging from stablecoins to central bank digital currencies (CBDCs).
She also highlighted the absence of regulation around cryptocurrencies and the need of resolving this problem prior to their widespread adoption:
“All of these issues will get more attention in the aftermath of recent events, which brings us to the issue of international regulation. There is a need there that has to be addressed,” she said.
On February 24, the day Russian soldiers invaded Ukraine in a “special military operation,” the crypto market immediately sold down, resulting in almost half a billion dollars in losses.
With more than 90% of Bitcoin (BTC) in circulation, its inflation rate fell to 1.7 percent in March, five times that of the US dollar, presenting BTC as a potential inflation hedge for investors.
As a result, the market has made a stunning comeback, with the price of Bitcoin, the market’s main asset, marching higher — climbing by as much as 35% since the invasion’s start and propelling the market’s capitalisation to $2.12 trillion.
Notably, cryptocurrencies have shown their effectiveness as a way of obtaining support for the invading people and their military. According to Finbold, cryptocurrency contributions just reached $100 million.
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