Peter Smith, the CEO of Blockchain, the second most widely utilized cryptocurrency wallet behind Coinbase, stated that central banks will begin to hold major digital currencies like bitcoin and Ethereum’s native token Ether in 2018.
“I think this year will be the first year we start to see central banks start to hold digital currencies as part of their balance sheet. Bitcoin is already a top 30 currency by supply, and this trend, and pressure to hold digital currency as part of reserves will only accelerate as the price rises,” said Smith.
In December 2017, it was reported that the Bulgarian government has more than $3 billion in bitcoin in its account, mostly from funds seized during law enforcement investigations and crackdown on dark web marketplace operators.
In May, the Bulgarian authorities officially stated that it had seized 213,519 bitcoins that are now worth over $3.2 billion, given the price of bitcoin at $15,000.
“As result of this criminal activity the damages recorded by the Customs Agency, only for year 2015, is around 10 million Leva. As well, up to now were found in the virtual space bitcoin wallets of the main suspects with a total value of 213,519 bitcoins,” the Bulgarian government said.
In addition to law enforcement seizures of bitcoin, global central banks will likely begin to acquire large sums of bitcoin, Ether, and other major cryptocurrencies because the digital currency market has grown at an exponential rate over the past few years. Bitcoin in particular has achieved a market valuation of $250 billion, and analyst expect it to continue evolving into a premier store of value, eventually competing against the $8 trillion gold market.
Moreover, if bitcoin becomes one of the reserve currencies of the global economy by targeting the $40 trillion offshore banking market, $8 trillion gold market, and the $50 trillion fiat currency market, governments will need to have a supply of bitcoin and alternative cryptocurrencies as the leading financial authorities.
However, the acquisition of bitcoin and other cryptocurrencies in the market could demonstrate a sign of defeat to the general public, considering that for more than two full years, some of the leading central banks and government agencies in China, Europe, and the UK have been working on issuing central bank-issued cryptocurrencies.
Two years later with hundreds of millions of dollars invested in research and development, central banks are not even close to testing government-backed cryptocurrencies. The lack of progress in central bank-backed cryptocurrency development is a result of the aggressive implementation of an ambitious plan that was never realistic to begin with.
The entire purpose of cryptocurrencies and blockchain-based networks is based on the fundamental concept of decentralization. On blockchain networks, users can send and receive payments, transactions, and information on a peer-to-peer basis.
In the future, whether central banks believe in the technology that supports bitcoin or not would be of less importance. The investment and security value of bitcoin alone would lead governments to acquire massive amounts of cryptocurrencies, especially if they begin to show signs of evolving into global reserve currencies.
Featured image from Flickr/World Economic Forum.
Last modified: May 20, 2020 9:11 PM