Posted 5 months ago | by @devadmin
According to a recent article by the Bank Of Singapore (BOS), cryptocurrencies could at least partially replace gold as a store of value.
The Bank of Singapore, a private banking arm of Oversea-Chinese Banking Corporation (OCBC) Bank, has released a bullish report on the future of cryptocurrency digital assets.
However, Mansoor Mohi-uddin, chief economist at Bank of Singapore stated that before that can happen, cryptocurrencies must overcome a number of ongoing hurdles including high volatility, regulatory acceptance and reputational risks, according to a research note from the bank first reported by The National News.
The bank says it is the volatility of cryptocurrencies that makes them “an inefficient unit of exchange.” According to the bank, this inefficiency makes cryptocurrencies an unsuitable medium of exchange. Although, as The National News explains, cryptocurrencies stand a better chance if they can overcome “key hurdles such as trust, volatility, regulatory acceptance and reputational risks.” When these hurdles are overcome then such “digital currencies can also be used in investor portfolios as a potential safe-haven assets and for asset diversification.”
The same media report quotes Mansoor Mohi-uddin, the chief economist at BOS, who explains that investors also “need trustworthy institutions to be able to hold digital currencies securely.”Additionally, the economist stated “liquidity needs to improve significantly to reduce volatility to manageable levels.” The bank believes bringing in more institutional investors might be the key to taming the volatility of the cryptocurrency market.
“Increased participation by institutional investors such as asset managers with longer-term time horizons than retail buyers or hedge funds could help to increase liquidity, lower volatility and cause price action to be driven more by fundamentals than speculation,” BOS wrote.
“First, investors need trustworthy institutions to be able to hold digital currencies securely. Second, liquidity needs to improve significantly to reduce volatility to manageable levels,” Mansoor Mohi-uddin, chief economist at Bank of Singapore, wrote.
If the issues can be addressed, the bank believes that Bitcoin could have a place in investors’ portfolios as a potential safe-haven asset and means to diversify assets, Mohi-uddin said.
Cryptocurrencies offer the benefit that they are easy to move and store when compared with precious metals, though they are also prone to theft via hacking, per the note.
Mohi-uddin doesn’t see cryptos replacing fiat currencies, however, as he considers them an inefficient unit of exchange.
“Governments are very wary of any technology that could potentially displace national currencies. This would reduce the ability of policymakers to print money during economic crises,” Mohi-uddin added.
Elsewhere in Singapore, Southeast Asia’s biggest bank DBS Group Holdings, recently announced plans to open up an exchange for digital assets, including cryptocurrencies, that will provide tokenization, trading and custody services to institutional and accredited investors, CNBC reported.
Bitcoin is currently trading at [FIAT: $32,211.64] DOWN -4.6% in the last 24 hours according to Coingecko at the time of this report.