A Harvard economist has published a new working paper recommending that central banks worldwide start buying bitcoin. According to a Politico report, Matthew Ferranti, a fifth-year graduate student at Harvard’s economics school, has published a new working paper arguing that central banks should start buying bitcoin. The paper, overseen by Ferranti’s Harvard adviser and former IMF economist Ken Rogoff, claims central banks would benefit from holding a small amount of bitcoin. The document says countries facing sanctions, or potentially facing economic sanctions, should continue to hold Bitcoin as a gold hedge substitute.
In an interview with Politico, Ferranti emphasized that countries could use cryptocurrencies to circumvent sanctions the US and other world powers imposed. However, he argued that gold was the better hedging alternative, saying: [gold is] so much less volatile. It’s about five times less volatile.
Ferranti told Politico that countries would benefit from holding cryptocurrencies alongside gold as the two assets are uncorrelated and diversification increases. He also pointed out that countries at risk of sanctions tend to have poor infrastructure and are, therefore, less likely to be able to source enough gold to hedge their risk adequately.