Central Bank of Barbados and Bitcoin? Former central bank economist suggests including it in foreign exchange reserves

Two former economists from the Central Bank of Barbados published a report in October titled: Should Cryptocurrency Be Included in the International Reserve Asset Portfolio of the Central Bank of Barbados? In this report, they suggested that the Central Bank of Barbados should consider including digital currencies in its foreign exchange reserves. Although they gave such a surprising suggestion, they only recommended a small amount of reserves.

Summary of the report

In most countries, central banks are required to hold reserve assets to provide credibility to the value of fiat currencies. These assets can be gold, foreign exchange or other internationally recognized reserve assets.

Cryptocurrencies have been increasingly used in international transactions in recent years and are likely to expand further in the future. Therefore, this paper explores the potential role of cryptocurrencies as part of a central bank’s portfolio of foreign assets.

In the case of Barbados, this paper also provides a simulated effect of the Central Bank of Barbados holding a certain proportion of digital currency as its asset base.

Former central bank economist

Dr. Winston Moore is currently a senior lecturer at the University of the West Indies, and previously worked as a senior economist at the Central Bank of Barbados. Jeremy Stephen is an experienced financial advisor, and previously was an economist at the Central Bank of Barbados, where he maintained the bank's economic and fiscal forecasting models.

The local media in Barbados also reported the shocking views of these two economists:

“Given that the proportion of digital currency transactions in Barbados is unlikely to exceed ten percent of all transactions in the short term, it follows that if Bitcoin is included in the Central Bank of Barbados’ foreign exchange portfolio, its share should be relatively small.

As a result, digital currencies may become the key currency for settling transactions. In addition, considering that Barbados maintains a peg to the US dollar, it is necessary for the Central Bank of Barbados to hold a sufficient number of different currencies as a precautionary measure against speculative attacks.”

For the full report, please visit the document library: http://8btc.com/doc-view-323.html

Original article: https://ihb.io/2015-11-29/news/barbados-and-bitcoin-26685#UVDR
By Emma Roth
Compiled by: Satuoxi
Editor: Satuoxi
Source (translation): Barbados Information (http://www.8btc.com/barbados-and-bitcoin)