Why should a central bank buy Bitcoin? Christine Lagarde’s weird answer is the truth
As reported by some sites, Christine Lagarde found herself answering questions regarding Bitcoin, thus revealing a rather limited knowledge of monetary matters, which we did not have many doubts about.
Bitcoin, according to him:
"It is not a currency".
He also added that Bitcoin lacks the stability typical of a coin :
“It doesn't have the stability that would be required to be a currency. According to our analysis it is a digital crypto asset. I think in many cases it has been exploited in funny ways ”.
Will it ever be used by central banks?
"I'd say that's out of the question."
In reality, all this indicates that Mrs. Lagarde is not very clear on the functions of money. This must be " Store of Value " and " Means for Settlement of Trade " and, for better or for worse, Bitcoin performs both functions. Indeed, the current weakness of BTC is that of being excessively store of value and still not sufficient medium of exchange, even if growing, and we will see if the Tesla operation, wanted by Elon Musk, will lead to some improvement in this sense.
Is Bitcoin's Volatility Still High? If there is actually an expansion in common use, which is also feasible with Paypal, this will be significantly reduced because the demand will no longer be speculative, but will become structural and linked to real goods and services. However, the stability of "Ordinary" currencies is also linked to the interventions of central banks and these do not intervene on Bitcoin.
So we come to the last step: Should central banks buy Bitcoin? In itself no, or rather not yet. Central banks hold foreign exchange reserves mainly for two reasons:
- for the needs of the economic system, to allow it to have the foreign currency necessary to maintain regular trade;
- because they result from the effect of a monetary policy of the central bank, as happens, for example, at the SNB, the Swiss central bank, which buys euros in an attempt to keep the exchange rate under control with the currency of the Single Monetary Area.
So, say for yourself, at present, there is no reason for a central bank to buy Bitcoin, unless it wants to accumulate a store of value alongside gold. Maybe someday, when enough transactions are settled in BTC, then the central bank will need to own a certain amount. For now, however, it is early.
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The article Why should a central bank buy Bitcoin? Christine Lagarde's wacky answer and the truth comes from ScenariEconomici.it .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/perche-una-banca-centrale-dovrebbe-comprare-bitcoin-la-stramba-risposta-di-christine-lagarde-e-la-verita/ on Tue, 16 Feb 2021 07:00:46 +0000.