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Currently, the G7 is only concerned with the "appropriate regulation" of cryptocurrencies and not with the asset class potential of cryptocurrencies. Bitcoin, ether and zcash are nowhere to be found on the list of eligible instruments and currencies that central bankers are allowed to trade.
In 2018, things will be different. G7 central banks will start buying cryptocurrencies to bolster their foreign reserves.
The times they are a-changin'.
Gold is commonly held because it is used as protection against black swan economic events. It can be used as a buffer against calamity because of its high liquidity, currency attributes and its diversification benefits.
The prescient Christine Lagarde, managing director of the IMF, has already warned central banks about cryptocurrency causing massive disruptions.
In 2018, G7 central banks will witness bitcoin and other cryptocurrencies becoming the biggest international currency by market capitalization. This event, together with the global nature of cryptocurrencies with 24/7 trading access, will make it intuitive to own cryptocurrencies as they become a de-facto investment as part of a central banks investment tranche.
Cryptocurrencies will also fulfil a new requirement as digital gold.
Furthermore, foreign reserves are used to facilitate international trade. This means holding reserves in a trading partner's currency makes trading simpler. In 2018, cryptocurrencies like bitcoin will be utilized for international trade on a moderate basis because the high returns as an investment will encourage a ‘hold’ strategy for G7 countries.
G7 central banks will purchase cryptocurrencies as a hedge to the performance of their economy.
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