The Bank of England is preventing Venezuela from repatriating its gold reserves, as per the latest reports from The Times. The repatriation is being refused because it is thought that President Maduro would use the gold for personal gain. A total of 14 tonnes is being held by the Bank of England, which amounts to USD 550 Million.
US sanctions hitting Venezuela
Venezuela is trying to get its gold back due to a fresh round of US sanctions aimed at gold. Gold has long been heralded as a valuable economic asset much stronger than printed currencies. Venezuela uses gold as collateral to attain billions of dollars in loans, and its USD 550 Million of gold could be loaned out for much more if the gold was secured. The nation is currently suffering from a complete collapse and 1,000,000% inflation due to widespread socialist policies and US sanctions. This figure surpasses the Weimar Republic collapse, the most famous case of hyperinflation.
Gold and cryptocurrencies share common attributes in that each has an intrinsic value recognized by the marketplace instead of being enforced by laws. Additionally, it takes resources to mine both, as opposed to printed fiat. Many have speculated that the true wealth of a nation is dependent on its gold reserves. In the event of a financial catastrophe, those with the biggest reserves will have a distinct advantage. However, a new financial system is already developed and operational as cryptocurrency adoption continues to increase daily by vendors, merchants, and institutions.
Bank of England ignoring the law
British officials are said to be insisting on money laundering procedures to take place and want clarification of the intention of the Venezuelan government for the gold. Money laundering has become the de facto standard for political figures when it comes to threats of all kinds. It is still cited as an argument against cryptocurrency, despite the fact that one recent fiat AML scandal (Danske Bank) was worth more than the entire cryptocurrency market capitalization.
Money laundering is far easier to do and much larger in the fiat markets compared to gold or cryptocurrencies, but this is irrelevant. The reality is that a refusal by the Bank of England to give a sovereign state its gold is a breach of the law. It is not up to British politicians or central banks to violate an agreement based on their subjective views (and, more likely, vested interests).
It is for reasons such as this that cryptocurrencies have emerged. Cryptocurrencies offer the user the ability to manage their own bank account with their own keys. No third-parties are necessary for the open source economy. As fiat financial markets continue to collapse it will be interesting to see the importance of gold and cryptocurrencies in the new model. Both have a role to play as valuable assets.
Digital Nomad with an interest in Zen and Blockchain technology.
Law graduate with 3 years experience as a consultant in the capital markets industry and 4 years experience freelancing on UpWork as a Creative Writer.