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We said it before, they are saying it now. Almost 85 percent of central bankers do not expect cryptocurrencies to replace gold as their national stores of value, according to an annual survey of 30 central banks by financial services firm UBS.
Also, 57 percent do not expect digital currencies to have a meaningful impact on their reserve operations.
Cryptocurrencies have investment potential as an asset whose value is unattached to tangible assets, about 25 percent of survey respondents said.
Bitcoin and other digital currencies could be a storehouse of value as central banks degrade the value of national currencies by flooding them into markets to buoy shutdown-battered economies, sparking inflation, some crypto enthusiasts have suggested.
However, the coins’ recent volatility has shown that its own value can swing suddenly and dramatically on the whims of the market—or even a single tweet from Elon Musk. (See our “CRYPTOCURRENCY SPECIAL REPORT”, 25 May, 2021.)
At the same time, most major central banks are planning so-called “central bank digital currencies” (CBDCs) or “stablecoins,” the values of which are derived from the value of national currencies.
Central banks are pursuing national digital currencies to modernize retail payment systems, smooth and speed interbank transfers and settlements, and thwart money laundering and other crimes, the UBS survey found.
China plans to distribute a digital yuan, the world’s first CBDC, next year; other nations are still in the planning or early testing stages, the Financial Times reported.
TREND FORECAST: As we noted in our “Gold vs. Cryptos” analysis in our 21 November, 2018, edition, confidence in a money without intrinsic value is tenuous, and history has shown that once lost, it does not return. Cryptocurrencies do not offer security against market winds, thus they will not be to replace gold or national currencies. However, as we have forecast they have provided the technology that will permit central banks to enter the age of digital money. (See, “FROM DIRTY CASH TO DIGITAL TRASH”).