European Central Bank Says Crypto Assets May Be Acting As Legitimate Story of Value in New Report

The European Central Bank (ECB) says that Bitcoin (BTC) and other digital assets have been playing the role of a store of value for many people around the world.

In a new report on the global and local drivers of Bitcoin and crypto, the ECB names three things that are driving the adoption of digital assets in emerging and developing economies (EMDEs).

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One of the catalysts that the ECB mentions is the store of value that digital assets may provide 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 ECB also says that the rampant debasement of fiat currencies – which has accelerated since the Covid-19 pandemic – particularly in EMDEs, has helped spark more crypto trading.

“The depreciation of the domestic currency of EMDEs – notably not of the currency of AEs (advanced economies) – induces more Bitcoin trading, in particular after the COVID-19 pandemic.

This indeed suggests that Bitcoin, despite its wide price fluctuations, might have been appreciated also as a store of value or medium of exchange in countries which experienced a loss in the the purchasing power of their domestic currency. In turn, this implies that macroeconomic instability may potentially spur greater cryptoasset usage.”

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Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.

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