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By Nigel Green
The financial landscape is on the verge of a major transformation following Saudi Arabia's decision not to renew its half-century-long petrodollar agreement with the United States, which expired on June 9, 2024.
The original security agreement, signed on June 8, 1974, established two joint commissions - one focused on economic cooperation and the other on Saudi Arabia’s military requirements.Â
This pact marked a period of deepening collaboration between the two nations. However, with the contract no longer in place, Saudi Arabia now has the freedom to conduct oil transactions in a variety of currencies such as the China’s Renminbi, Euros, Yen, and Yuan, instead of being restricted to the US dollar.
This shift signifies a considerable departure from the petrodollar system that was put in place in 1972, following the US decision to decouple its currency from gold.Â
The end of this era is expected to accelerate the global movement away from the US dollar. In this evolving scenario, digital currencies, particularly Bitcoin, could see a significant boost.
Demise of the petrodollarÂ
The petrodollar system, which has been a cornerstone of the global financial order for decades, is now being challenged.Â
This system effectively meant that oil transactions globally were predominantly conducted in US dollars, reinforcing the dollar’s position as the world’s primary reserve currency.Â
The termination of the Saudi-US agreement marks a pivotal shift.Â
Saudi Arabia’s decision to diversify the currencies in which it trades oil can be expected to diminish the demand for the greenback.Â
As a result, nations and investors worldwide might seek alternative stores of value and mediums of exchange.
Rise of Bitcoin in a diversified currency world
In a world moving away from dollar hegemony, Bitcoin stands out as a promising alternative.Â
Bitcoin, with its decentralized nature and limited supply, offers an attractive hedge against the potential volatility and depreciation of traditional fiat currencies.Â
Unlike traditional currencies, which can be subject to the inflationary policies of central banks, Bitcoin operates on a fixed supply principle, with only 21 million Bitcoins ever to be mined. This scarcity feature positions Bitcoin as a digital gold, a reliable store of value in uncertain times.
Saudi Arabia’s strategic pivot could also influence other nations to reconsider their dependence on the US dollar, creating a more favourable environment for cryptocurrencies.Â
And the world’s original and largest crypto’s global acceptance and increasing integration into financial systems make it a viable candidate for international trade and investment.
Potential for Bitcoin Adoption by Saudi Arabia
As Saudi Arabia explores its options beyond the dollar, the potential for adopting digital currencies like Bitcoin becomes increasingly plausible.Â
To my mind, Bitcoin’s transparency, security, and ease of transaction make it an appealing choice for international trade.Â
Additionally, Bitcoin's blockchain technology can enhance the efficiency and security of financial transactions, reducing the risk of fraud and enhancing trust among trading partners.
The Saudi leadership's future consideration of Bitcoin would align with the broader trend of digital transformation in finance.Â
Several countries and most major financial institutions are already exploring or adopting blockchain technology and digital currencies.Â
By incorporating Bitcoin into its financial and trade practices, Saudi Arabia could position itself at the forefront of this digital revolution, attracting tech-savvy investors and businesses.
Let’s be clear: Saudi Arabia’s decision to move away from the petrodollar system marks a critical juncture in global finance.Â
I’m confident that Bitcoin, with its unique attributes and growing acceptance, stands to benefit significantly in the long-term from this transition.
Author Bio
Nigel Green is deVere Group CEO and Founder
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.