After the freezing of the Russian central bank reserves, people are asking whether emerging economies could diversify their forex reserves from $ to yuan. Some fancy terms like CBDC etc being thrown as a magic bullet. 1/n However, this will be an extremely difficult manoeuver for the following reason. Forex reserves are kept in good quality liquid financial assets. And a financial asset—in contrast to a physical asset like gold—must be someone else’s liability. 2/n