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Will the Russia-Ukraine Conflict Spike Digital Currencies?

Larry Fink, CEO of BlackRock said in a letter to shareholders that the current crisis in Ukraine could lead to digital currencies spiking.

Alena Vogt Mar 24, 2022

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Since Russia’s invasion of Ukraine, which Putin has defended as a liberation of Ukraine from Neo-Nazis and drug addicts, oppressing the rest of the country (Der Spiegel, 2022), Russia has been hit with hard sanctions from western policy makers. Any transactions with Russia have become increasingly difficult.

Fink believes that these steps away from globalisation may accelerate digital currencies as countries will need to find new ways to settle international transactions with Russia. In his letter to shareholders the BlackRock (BLK) -1.39% chief stated a reassessment of currency dependencies may be necessary and the asset manager will look further into digital currencies and stablecoins, which have received a lot of client interest since the beginning of the war in Ukraine.

The letter reads: “A global digital payment system, thoughtfully designed, can enhance the settlement of international transactions while reducing the risk of money laundering and corruption” (Reuters, 2022). A change of tune for Larry Fink, who only last May felt cryptocurrencies were too volatile to be seen as anything more than speculative trading tools.

In the wake of Moscow’s invasion of Ukraine, BlackRock suspended its purchases of any Russian securities in its active index portfolios. Fink justified this move by writing that access to global capital markets is a “privilege, not a right” (Reuters, 2022). Looking at ways to prevent money being pushed into Russia “is the definition of our fiduciary duty,” (Reuters, 2022)

BlackRock’s total client exposure in Russia has declined immensely since the war began, shrinking from $18 billion to under $1 billion earlier this month.

The conflicts impact on global supply chains will only contribute to already increasing inflation across the world. After two years of pandemic, already damaged economies, including the Russian economy will truly feel the impact of these sanctions and their consequences.

“While companies’ and consumers’ balance sheets are strong today, giving them more of a cushion to weather these difficulties, a large-scale reorientation of supply chains will inherently be inflationary,” (Reuters, 2022) warns Fink.

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*Barbuscia, Davide & Lewis, Matthew (24. March 2022). Reuters: BlackRock’s Fink says Russia-Ukraine crisis could accelerate digital currencies. Last viewed on 24.03.2022 on https://www.reuters.com/technology/blackrocks-fink-says-russia-ukraine-crisis-could-accelerate-digital-currencies-2022-03-24/

*Neef, Christian (05. March 2022). Der Spiegel: Held und Tyrann, Number 10, Pages 20 – 22.

Alena Vogt

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