Can foreign-currency reserves be sanction-proofed?

CRYPTO INVESTORS sometimes say they have been “rugged” when the developers of a coin vanish, along with the capital that has been allocated to it, pulling the rug out from under them. Foreign-exchange reserve managers might never have expected to recognise the feeling. But almost as soon as Russia invaded Ukraine, American and European authorities froze the assets of the Central Bank of Russia. As others followed, the country’s first line of financial defence was obliterated. According to the Russian government, $300bn of its $630bn in reserves are now unusable.The managers of the $13.7trn in global foreign-exchange reserves are a conservative breed. They care about liquidity and safety above all else, largely to the exclusion of profits. Much of their thinking was shaped by the Asian financial crisis of 1997-98, when currencies collapsed in the face of huge capital outflows. The lesson learned was that reserves needed to be plentiful and liquid.