According to Zoltan Pozsar, an analyst at UBS, a global commodity crisis is “brewing” and the new global monetary system – Bretton Woods Ⅲ may be developing under the background of the Russian- Ukrainian War and sanctions in western countries.
A recent report by Huobi Research Institute, titled “Is Bretton Woods Ⅲ coming? And How Will Bitcoin Be Affected?”, examines how such a cycle “may affect Bitcoin (BTC) and its potential to be a dominant currency.’
The establishment of the Bretton Woods system played “a positive role in global economic growth and asset price stability during a significant period in history when it was established after World War II.”
However, the system collapsed in the 1970s and “a new system was not established until the 1990s, where the Bretton Woods System II was formed.”
This new system has the US dollar “acting as the dominant currency and forming a currency basket with currencies such as the Yen and the Euro, acting as the monetary anchor for many emerging markets.”
As a result, the circulation of the US dollar in the world “was established.” However, Bretton Woods II is now “facing another major challenge: the destruction of the global monetary system by geopolitical events such as the Russia-Ukraine war.”
The report predicts that Bitcoin may “benefit from such a development.”
After the outbreak of the war, sanctions imposed by Europe and the United States on Russia mainly “reflect two major problems: First, the financial system rooted in Europe and the United States is not secure.”
As European and American countries continue to freeze Russia’s bank accounts in their own countries and remove Russia from the SWIFT system, they “will freeze Russia’s own assets and hinder Russia’s cross-border payment activities; secondly, ‘Inside Money’ dominated by European and American countries is not safe.”
To ensure the safety of domestic wealth, “exogenous currency” (or “outside money”) will “become an option to be considered.”
As such, cryptocurrencies, such as BTC, can “solve this problem, because exogenous money is akin to being like ‘uncontrollable money’, where debts belong to nobody (such as gold and BTC).”
Countries may “move away from holding reserves in the form of fiat currencies to gold, cryptocurrencies and other commodities as new reserve assets in an effort to keep free from others’ control in the future.”
While the world is currently seeing the potential collapse of Bretton Woods II and the potential birth of Bretton Woods III, “the future is difficult to predict.”
But it is possible that Bitcoin “may become a foreign exchange reserve in the future.”
Huobi Research Institute researcher William Lee said:
“We hope this report sets people thinking about the birth of a new monetary system and how cryptocurrencies can play an important part in this, especially in today’s world where everything has become so uncertain.”
To access the complete report, check here.
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Chris Munch is a professional cryptocurrency and blockchain writer with a background in software businesses, and has been involved in marketing within the cryptocurrency space. With a passion for innovation, Chris brings a unique and insightful perspective to the world of crypto and blockchain. Chris has a deep understanding of the economic, psychological, marketing and financial forces that drive the crypto market, and has made a number of accurate calls of major shifts in market trends. He is constantly researching and studying the latest trends and technologies, ensuring that he is always up-to-date on the latest developments in the industry. Chris’ writing is characterized by his ability to explain complex concepts in a clear and concise manner, making it accessible to a wide audience of readers.
