Amongst all the crypto news this, and crypto news that, was a tiny item appearing in the Nikkei Asian Review on September 1st. Reporting from Denpasar, Indonesia, Damon Evans wrote, “China is expected shortly to launch a crude oil futures contract priced in yuan and convertible into gold in what analysts say could be a game-changer for the industry.”

Not bitcoin backed, not ethereum backed, g-o-l-d backed. How low tech of the Chinese. For the moment, oil is priced in dollars, whether it’s Brent or West Texas Intermediate.

Evans explained,

China’s move will allow exporters such as Russia and Iran to circumvent U.S. sanctions by trading in yuan. To further entice trade, China (the world’s largest oil importer) says the yuan will be fully convertible into gold on exchanges in Shanghai and Hong Kong.

This will be China’s first commodities futures contract open to foreign companies such as investment funds, trading houses and petroleum companies. 

China has wanted to unshackle itself from the dollar for a long time and now they’re giving yuan-denominated gold contracts a third try.

“It is a mechanism which is likely to appeal to oil producers that prefer to avoid using dollars, and are not ready to accept that being paid in yuan for oil sales to China is a good idea either,” Alasdair Macleod, head of research at Goldmoney, said.

“It’s a transfer of holding their assets in black liquid to yellow metal. It’s a strategic move swapping oil for gold, rather than for U.S. Treasuries, which can be printed out of thin air,” Grant Williams explained.  

If Saudi Arabia accepts yuan settlement for oil, Louis-Vincent Gave said, “this would go down like a lead balloon in Washington, where the U.S. Treasury would see this as a threat to the dollar’s hegemony… and it is unlikely the U.S. would continue to approve modern weapon sales to Saudi and the embedded protection of the House of Saud [the kingdom’s ruling family] that comes with them.”