Freezing forex reserves opens door for central banks to buy Bitcoin

[LONDON] Following the invasion of Ukraine, the Russian central bank's foreign exchange reserves at the Federal Reserve, the Bank of England, the Bank of Canada and the European Central Bank have been frozen. This could boost cryptocurrency to a more prominent position within central bank reserves.

The US$640 billion in assets in the Central Bank of Russia's name was assumed to be safe. Previous rounds of sanctions have focused on the assets and liabilities of targeted individuals and institutions - freezing the assets and making the liabilities toxic. The assets of central banks have not been in scope before.

It is a devastating blow for Russia. That money provided a means of protecting the rouble and, in extreme circumstances, the government might have seized it for the purposes of direct expenditure.