Central bankers doubt that Bitcoin and other cryptocurrencies will replace gold as a safe store of value, but are optimistic about the prospects of official digital tokens because the authorities are struggling to respond to the cryptocurrency boom.
According to UBS’s annual survey of 30 major central banks, nearly 85% of reserve managers stated that they did not expect cryptocurrencies to replace precious metals in their foreign exchange reserves.
More than a quarter of the respondents said that Bitcoin and its peers have investment potential as unrelated assets that do not move in sync with other markets, but 57% of officials said they believe that cryptocurrency will not make sense for their reserve business Impact. To UBS.
The cautious mood of central bank officials comes at a time when the cryptocurrency industry has boomed in recent years, prompting official agencies to more seriously consider how to regulate these assets and the extent to which they should play a role in their business.
Many cryptocurrency advocates see digital tokens as a way to preserve the value of their savings, and at this time central banks around the world have launched large-scale stimulus plans in response to the pandemic, which has raised concerns about periods of higher inflation.
However, according to investors and analysts, the violent volatility of many tokens has pushed a large number of mainstream investors away from asset classes and weakened their attractiveness as a stable store of value.
Although central bank officials have doubts about private cryptocurrencies, they are increasingly certain about the prospects of official coins or central bank digital currencies.
About 60% of central bank reserve managers surveyed by UBS stated that they expect at least one G7 central bank to provide digital currency directly to consumers in the next five years. More than 80% of respondents stated that they expect to launch “wholesale” central bank tokens during this period, which will be provided to large financial institutions.
Officials said that the two main motivations for pursuing central bank digital currencies are to enhance the retail payment system and upgrade the broader financial infrastructure, including key functions such as clearing and settlement. According to UBS, they also stated that these central bank coins can help reduce crime and money laundering.
China is one of the world leaders in central bank-backed tokens, and its digital renminbi is already in the experimental stage, while major central banks elsewhere are only exploring similar projects.
In traditional financial markets, reserve managers label the high debt levels of the global economy as a major risk and failure to end the pandemic. The study also highlighted the continuous increase in the share of China’s renminbi in foreign exchange reserves. Massimiliano Castelli, one of the authors of the UBS report, said that renminbi reserves may reach 15% in the next ten years.