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ECB President Christine Lagarde dismisses Bitcoin as a potential reserve asset, while multiple US states propose its adoption for strategic reserves.
The European Central Bank (ECB) has found itself in the middle of a controversial issue of Bitcoin BTC $83 720 24h volatility: 1.6% Market cap: $1.66 T Vol. 24h: $25.29 B adoption by nation-states as a measure to strengthen their asset reserves. More central banks – led by the US Federal Reserve – are looking at ways to strengthen their balance sheet to possibly counter their ballooning national debt.
Furthermore, El Salvador has proved that a nation can meet its obligations and attract more foreign investment by adopting Bitcoin as a strategic reserve. As Coinspeaker pointed out, a dozen US States – led by Texas, Ohio, Florida, and Massachusetts, among others – have introduced a proposal to implement a strategic Bitcoin reserve.
Earlier today, while speaking to reporters following the Governing Council’s monthly monetary policy meeting, ECB President Christine Lagarde, downplayed the possibility of Bitcoin being included in the reserves of any of the union’s central banks. Despite the European economy having stagnated in the fourth quarter, Lagarde highlighted that the ECB’s Governing Council will not approve the inclusion of Bitcoin as a strategic reserve asset.
Largade noted that Bitcoin does not meet all the set requirements for an asset to be included as a reserve asset. The ECB has over the years, since its inception in 1998, tapped into assets that are perceived as highly liquid, secure, and free from potential money laundering risks.
“Reserves have to be liquid, reserves have to be secure, they have to be safe, and they should not be plagued by money laundering or other criminal activities,” She said.
In this regard, the ECB has leaned heavily towards gold as a reserve asset, with its latest adjustment increasing its gold’s share in the foreign reserve from 15 percent to nearly 35 percent of its total assets.
The debate on whether Bitcoin is a better safe haven than Gold has existed in the past years, particularly fueled by the rising demand for BTC by institutional investors. While Gold price rallied to a new all-time high of about $2,798 earlier today, Bitcoin price has continued to consolidate in a range between $106k and $91.7k during the past two months.
Nonetheless, Bitcoin price has in the long haul outperformed Gold in return on investment, thus convincing more nations to adopt BTC as a strategic reserve. The ECB has moved in the opposite direction with the United States in adopting Bitcoin as a strategic reserve, which experts believe will significantly disadvantage the bloc in the near future.
Furthermore, Largade expects the economy to remain weak in the near term, despite cutting the interest rates by 25 basis points to 2.75 percent.
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