The Role of Crypto in Central Bank Reserve Operations

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The motivation for this piece is the 2021 Annual Reserve Management Survey by UBS – view the full report HERE.

Combining the results of that survey with some of our own analysis we conclude that:   

  1. When it comes to the role of crypto in reserve operations, central bankers are as yet undecided.
  2. We see a clear trend over the past two or so decades of central banks including more and riskier assets in their toolbox.
  3. We think that existing crypto such as Bitcoin has a role to play in reserve management operations and that central banks could use it to their benefit in the current environment.
  4. We think that the introduction of Central Bank Digital Currencies (CBDCs) and the possible risk of disintermediation of the banking system could benefit, rather than endanger, financial stability.
  5. We believe that the introduction of CBDCs will not “antagonize” or be a threat to existing crypto. A more likely scenario is for CBDCs to complement other cryptocurrencies.

Read our full insight piece in the PDF below.

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