A new research note released by the Bank of Singapore (BOS) suggests that cryptocurrencies are more likely to replace gold as a store of value. However, the note says it is unlikely that such digital currencies can replace fiat currencies even as their appeal grows.
Inefficient Unit of Exchange
According to the research note, it is the volatility of cryptocurrencies that makes them “an inefficient unit of exchange.” This inefficiency, in turn, makes cryptocurrencies an unsuitable medium of exchange. Still, as one local outlet report explains, cryptocurrencies stand a better chance if they can overcome “key hurdles such as trust, volatility, regulatory acceptance and reputational risks.” When these hurdles are overcome then such “digital currencies can also be used in investor portfolios as a potential safe-haven assets and for asset diversification.”
Meanwhile, the same media report quotes Mansoor Mohi-uddin, the chief economist at BOS, who explains that investors also “need trustworthy…