(Kitco News) – Cryptocurrencies have made some significant headway into the mainstream economy this past year. However, central banks remain skeptical when it comes to digital currencies and continue to prefer gold as a safe-haven asset and store of value, according to a survey from UBS.
In UBS’s latest annual central bank survey, out of 30 participants, nearly 85% of reserve managers say they do not expect cryptocurrencies to replace the gold held in their foreign currency reserves.
The survey also showed that 57% of central banks do not expect digital currencies to have a meaningful impact on their reserve operations; However, that doesn’t mean that the managers don’t see value in bitcoin and other cryptocurrencies.
More than 25% of those surveyed said bitcoin and other digital currencies have investment potential as uncorrelated assets that do not move in tandem with other markets.
While central banks are expected to be bitcoin buyers anytime soon, discussions over the development of Central Bank Digital Currencies (CBDCs) continue to grow.
The survey said that more than 60% of reserve managers said they expected at least one central bank in the G7 would create a digital currency directly available to consumers within the next five years. Meanwhile, more than 80% said they expected that “wholesale” central bank coins would be made available to large financial institutions within the next five years.
The central bank comments on digital currencies come as the market has made significant gains to become accepted as a mainstream asset. In mid-April, the price of bitcoin hit an all-time high of $65,000 a token. However, since then, the price has declined 50% and is currently trading around $32,500 a token.
Many analysts have said that bitcoin has struggled in recent months as the market faces renewed pressure for further regulation.
Meanwhile, gold is expected to get further support from growing central banks’ demand. According to a World Gold Council report published last month, 21% of central banks expect to increase their gold reserves within the next year, relatively unchanged from 2020.
The report also noted that no central bank expects to sell gold this year.
“Inflation has also resurfaced as an investment consideration and may inform central bank asset allocation in the coming years. We believe that central banks will continue to be net buyers of gold, albeit at somewhat lower volumes than those of the previous decade,” the analysts at the WGC said.
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