A European Central Bank (ECB) working paper said Bitcoin (BTC) and other cryptocurrencies are being used as a store of value for many people globally.
The paper comes a year after the ECB itself dissed Bitcoin in a blog post, saying it was on ”the road to irrelevance.”
“Even though prices have been very volatile, these cryptocurrencies may represent a better store of value with respect to the domestic currency of countries where inflation is high and the exchange rate tends to depreciate,“ said the recently published working paper.
Because Bitcoin might have been used as a store of value in countries that experienced a loss in the purchasing power of their domestic currencies, “macroeconomic instability may potentially spur greater crypto asset usage,” it added.
Factors Driving the Adoption of Bitcoin in Emerging Economies
In emerging and developing economies (EMDEs), the paper said that cryptocurrencies’ ability to protect against unstable domestic currencies is a major catalyst for adoption.
Another factor driving adoption in developing countries is the fact that digital assets provide EMDE residents with an alternative payment method for cross border transactions. By utilizing this new payment option, residents can “circumvent capital controls” and “lower the cost of receiving remittances from abroad,” the paper said.
A Flaw That Could Curb Bitcoin Adoption
BTC’s high level of volatility may discourage people from using it as a payment method, the ECB paper said, while adding that stablecoins may become more prominent transactional mediums in the future.
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