There are several significant categories of international currency use: Official sector FX reserves Cross-border bank liabilities International debt securities OTC FX transactions (e.g. forwards and swaps) The Public Sector Official Sector FX Reserves
I wrote a couple articles about, what I believe, is the ticking clock counting down to the CNY's devaluation against the USD. There's a lot of leverage built up in the CNY carry trade at the moment, especially as the PBOC has been more willing to allow the CNY to strengthen against the USD during this cycle.
The problem is that any FX intervention by the PBOC itself or by the Chinese banking system on behalf of the PBOC will be ill-equipped to handle global dollar funding markets drying up. This problem would be compounded if we hit an economic slowdown or recession scare sometime in the next 12-18 months, as that would hurt Chinese exports, removing another source of dollars for the Chinese.
Re: central banks and crypto assets, I'm honestly not sure. I think smaller central banks, especially those of countries who feel wronged or excluded by the prevailing financial system, may begin to hold BTC as a type of hedge. It will be interesting to see what happens when/if central banks attempt to mandate the use of CBDC's.
Great post! Any thoughts on Chinese yuan NDF’s and do you foresee a day when central banks will hold decentralized cryptocurrencies?
I wrote a couple articles about, what I believe, is the ticking clock counting down to the CNY's devaluation against the USD. There's a lot of leverage built up in the CNY carry trade at the moment, especially as the PBOC has been more willing to allow the CNY to strengthen against the USD during this cycle.
The problem is that any FX intervention by the PBOC itself or by the Chinese banking system on behalf of the PBOC will be ill-equipped to handle global dollar funding markets drying up. This problem would be compounded if we hit an economic slowdown or recession scare sometime in the next 12-18 months, as that would hurt Chinese exports, removing another source of dollars for the Chinese.
Re: central banks and crypto assets, I'm honestly not sure. I think smaller central banks, especially those of countries who feel wronged or excluded by the prevailing financial system, may begin to hold BTC as a type of hedge. It will be interesting to see what happens when/if central banks attempt to mandate the use of CBDC's.