The growing popularity of cryptocurrencies may erode the dollar’s dominance. Western financial institutions, have dictated global commodities trade for decades. But now, many isolated nations are looking for alternatives. Digital currency may just be their solution.
The best example of this phenomenon — crude oil — is bought and sold in US dollars. This automatically links the oil market with US policy. Western powers have imposed sanctions on wayward, oil-rich countries making it difficult for them to trade in raw materials. Venezuela, Iran and Russia are most affected by Western economic pressure.
Following Venezuela’s model, Russia and Iran may consider using cryptocurrencies as an alternative to the dollar. A decentralised currency would facilitate the execution of oil contracts and would allow Russia and Iran to be independent of the greenback.
Oil analysts predict that both Russia and Iran plan to use the cryptocurrency for trading natural resources, RT reports.
“The advent of cryptocurrencies, therefore, represents a fresh catalyst for resource-rich countries wishing to abandon the dollar as a means of payment for oil.” – says Stephen Brennock, oil analyst at PVM Oil Associates.
Oil producers have been working for some time to eliminate the dollar from transactions. China, Russia and Iran agree to accept currency swaps in order to exclude the dollar. Moreover, China is working on a petro-yuan agreement with Venezuela for the same purpose.
The probability of these “black sheep” governments adopting cryptocurrencies is high. However, it is worth considering using such a cryptovalent as Bitcoin.
Countries can easily exchange fiat for cryptos (and vice versa), and their decentralized nature provides protection against international trade sanctions.