European Central Bank Highlights Crypto’s Legitimacy As Store of Value

It has been revealed the fact that the European Central Bank released a report in which the entity seems to be praising crypto. Check out more details about this below.

The European Central Bank (ECB) has recently released a report on the global and local drivers of Bitcoin and other digital assets.

The report highlights that digital assets have been serving as a store of value for many people around the world.

The ECB cites three factors that are driving the adoption of digital assets in emerging and developing economies (EMDEs).

One of these factors is the store of value that digital assets may offer to people in countries with unstable domestic currencies.

“First, cryptocurrencies may be used as speculative assets, which may be particularly attractive to investors from countries where the portfolio choice of investment assets is restricted by regulatory or institutional factors.

Second, even though prices have been very volatile, these cryptocurrencies may represent a better store of value with respect to the domestic currency of countries where inflation is high and the exchange rate tends to depreciate.

Third, residents from EMDEs may use cryptocurrencies as a means of payment in cross-border transactions to circumvent capital controls or to lower the cost of receiving remittances from abroad.”

The European Central Bank (ECB) has noted that the excessive devaluation of fiat currencies, particularly in emerging markets and developing economies (EMDEs), has led to an increase in cryptocurrency trading.

This trend has been accelerating since the outbreak of Covid-19.

The depreciation of EMDEs’ domestic currencies, which is not observed in advanced economies (AEs), has resulted in more Bitcoin trading.

This indicates that Bitcoin, despite its volatile price fluctuations, may be considered a store of value or a medium of exchange in countries that have suffered a loss in the purchasing power of their domestic currency.

This also implies that the instability of macroeconomic conditions may encourage greater use of crypto assets.