Are Central Banks About To Open The Floodgates For Gold And Cryptocurrency?
Content adapted from this Zerohedge.com article : Source
Are central banks about to get into cryptocurrency?
This is a possibility considering the profit that the Central Bank in Switzerland just cleared. It is reported that it had a record $55 billion profit last year making it the more profitable than Apple.
Investing in foreign assets, the $800 billion fund was able to generate substantial returns. In 2016, the bank started buying up gold.
Could "digital" gold be far behind?
Authored by Alex Deluce via GoldTelegraph.com,
Recently Switzerland's Central Bank Swiss National Bank garnered headline glory by reporting a record $55 billion (54 billion francs) profit last year, which exceeds even the annual profit of Apple and the combined profit of JP Morgan and Berkshire Hathaway. The central bank's strong result was aided by record profit on its equity holdings, bond prices, and its weaker currency.
SNB earned 8% of GDP last year
SNB's stupendous results made one wonder how the central bank emerged as a major money manager with a nearly $800 billion portfolio of bonds and stocks. Of note, unlike other central banks such as ECB, BOJ and FED, SNB's balance sheet largely comprised of foreign assets, with 49 billion francs of its profits generated from its foreign assets, while the central bank could net only about three billion francs from its gold holdings and another two billion francs from its Swiss franc positions. It is widely believed that SNB has been preventing Swiss franc from drastic appreciation by printing more francs and infusing them into global markets to buy bonds and stocks. The hefty profit of 54 billion francs clocked last year translates into 8% of Switzerland's GDP. Thus one can surmise that the central bank made substantial PROFIT OUT OF THIN AIR.
While SNB's gold holdings resulted in only about three billion francs of profit last year, various central banks turned out to be aggressive buyers of gold in 2017, having purchased 414.9 tons, as against 95.1 tons bought in 2016. Investors were in full focus when data from World Gold Council revealed that the central banks purchased 117.7 tons during October and November 2017 alone. It is well known that central banks prefer gold as protection against black swan economic events.
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— Gold Telegraph (@GoldTelegraph_) March 19, 2018
Welcome to Digital Gold
Amidst central banks' active reserve management skills, as elucidated above, a former central banker with the South African Reserve Bank believe in 2018, G7 central banks will start buying cryptocurrencies to propel their foreign reserves. Considering the recent popularity and upsurge witnessed in prices of cryptocurrencies, the former central banker predicts the special drawing rights and G7 country currencies will be forced to alter their foreign reserve weightages by ultimately including a basket of cryptocurrencies.
Considering bitcoin was designed to enact as digital gold, he reckons G7 central banks will witness bitcoin and other cryptocurrencies turning out to be biggest international currency by market capitalization. It is felt that such massive popularity of cryptocurrencies can force central banks to call for emergency meetings to exercise their prerogative to deviate from the existing investment policy for reserve management and hence ultimately central bank money could pour into cryptocurrencies.
Centralized Vs Decentralized digital currencies
Resonating the vast popularity of cryptocurrencies, it has been reported that Russia is working on a government-run cryptocurrency, while other leading countries including the US, China, Japan and Canada are either exploring or actively working on some form of digital currency. Similarly, central banks from Singapore to Sweden have been pondering the feasibility of issuing digital versions of their own money. It is felt digital currencies could cut out middlemen and banks.
Alluding to the rapidly evolving area of central banks' interest in digital currencies, Bank for International Settlement has come out with a report this month titled: "Central bank digital currencies". The report published by BIS' two committees viz.: Committee on Payments and Market Infrastructures and Markets Committee suggests central banks should carefully consider the implications for financial stability and monetary policy of issuing digital currencies.
Terming Central bank digital currencies (CBDC) as a potentially new form of digital central bank money, the BIS report underscores two main CBDC variants viz.: a wholesale (for use in financial market) and a general purpose (for use by the general public).
The following picture puts CBDC in the context of other types of money. The diagram focuses on the mix of four fundamental properties viz.:issuer (central bank or other), form (digital or physical), accessibility (widely or restricted) and technology (token or account based):
The BIS report notes cash and many digital currencies are token-based, while reserve account balances and most forms of commercial bank money are account-based.
The authors believe the wholesale variant would limit access to a predefined group of users, while the general purpose one would be widely accessible. The authors reckon the wholesale CBDCs, combined with the use of distributed ledger technology, may enhance settlement efficiency for transactions involving securities and derivatives. The report highlights that wholesale CBDCs might be useful for payments but more work is needed to assess the full potential.
The following table captures a comparative analysis of properties across existing and potentially new forms of central bank money:
Taking a macro view post the implementation of CBDC, the BIS report has come out with a stylized balances sheet of the central bank after the introduction of CBDC, duly reflecting the demand for CBDC and its enhanced assets holdings. The balance sheet clearly underscores the dominant role played by central bank digital currency, as it is projected to form a substantial share of central banks' liabilities:
Thus it is clearly evident that Bank for International Settlements is keeping pace with the opportunity in the central bank digital currencies...
Non-adapted content found at zerohedge.com: Source
I surely hope the floodgates will open and little old ladies like me get in here. Until that mass adoption happens, stability will not come.
I'm excited to see all the coins and their purposes and learn about them daily through @maarnio's crypto contests, which I highly recommend joining. The low fees and speed of transactions are key points of interest for me. That is a selling point for almost every coin he features. I transfer money between 3 countries right now and pay high fees everywhere in the fiat world. The several crypto coins I am in now all have very low fees - or no fees.
Out in the larger world all anyone knows about is btc and the mainstream news is full of scare tactics. Meanwhile, I think a lot of bigger interests are quietly buying in since they know this is going to pop for good one day. The sooner the better.
$55 billion is a massive amount of profit to make in a single year. This has indeed got to be an inspiration to the banks. And I feel more are going to jump right into cryptocurrencies which I feel is the easiest currency to exchange. This especially should be adopted by African banks which have amassed huge amounts of debt, inflation keeping getting high.. Making such abundant profits would deliver the African governments from the financial turmoil they are in as they would be able to cash in on the growth of resources instead of borrowing to have them grow.
Bitcoin don`t care about the central banks
Hard to say, I think banks are still super wary of this asset class
When the Great Wall of 1350 is finally breached the gold bugs will storm the cities 😆Yelling, I TOLD YOU SO!!!!
Disclaimer: I am just a bot trying to be helpful.
Hard to say, I think banks are still super wary of this asset class
Wow, banksters are getting richer and richer....I would like to know their secret to their wealth accumulation. If money is to be made, I knew the banksters and Central Banks will have their hand it the Cryptocurrencies.
if banks are into crypto we will be millionaires for sure . once it reaches 3 trillion bitcoin touches 100k$ . my dream sorry every bitcoin and crypto lover dream. let the flood come and wash us to the shore.
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