Government of Brazil and Central Bank reject proposal to create a strategic Bitcoin reserve in the country
During a hearing in the Chamber, the Central Bank dismisses Bitcoin as a reserve asset due to high volatility, while the Ministry of Finance admits the possibility in a sovereign fund.
On Wednesday, 20, during a hearing in the Chamber of Deputies, called to discuss the creation of a strategic Bitcoin reserve for Brazil, Luis Guilherme Siciliano, Head of the International Reserves Department, 'rejected' the proposal.
According to him, Central Banks are conservative and should use reserve assets that do not face high volatility.
“Answering your question: central banks are naturally guided by conservatism. This means that international reserves need to be composed of low-volatility assets. In times of stress or extreme crises, including geopolitical crises, local markets suffer strong spikes in volatility. Therefore, reserve assets must fulfill the opposite function: provide stability, serving as protection for the central bank to use them in these critical moments.
Thus, according to Siciliano, assets like Bitcoin and other cryptocurrencies do not fit this profile, precisely because of their highly volatile nature.
When a country needs to resort to reserves, it is essential that the assets are solid and secure. Even if a fraction of the reserves were applied to recognizably volatile assets, it would compromise the credibility of the monetary authority. After all, the function of reserves is precisely to ensure stability and trust. In this way, including cryptocurrencies in the reserves could generate reputational risks and weaken the perception of solidity of monetary policy.
Furthermore, according to him, there is the regulatory issue and there is still a lack of clear provisions that allow considering Bitcoin and other cryptocurrencies as eligible assets to officially compose the portfolio of a central bank.
Ministry of Finance is 'pro'-bitcoin,$BNB $ETH $BTC
During a hearing in the Chamber, the Central Bank dismisses Bitcoin as a reserve asset due to high volatility, while the Ministry of Finance admits the possibility in a sovereign fund.
On Wednesday, 20, during a hearing in the Chamber of Deputies, called to discuss the creation of a strategic Bitcoin reserve for Brazil, Luis Guilherme Siciliano, Head of the International Reserves Department, 'rejected' the proposal.
According to him, Central Banks are conservative and should use reserve assets that do not face high volatility.
“Answering your question: central banks are naturally guided by conservatism. This means that international reserves need to be composed of low-volatility assets. In times of stress or extreme crises, including geopolitical crises, local markets suffer strong spikes in volatility. Therefore, reserve assets must fulfill the opposite function: provide stability, serving as protection for the central bank to use them in these critical moments.
Thus, according to Siciliano, assets like Bitcoin and other cryptocurrencies do not fit this profile, precisely because of their highly volatile nature.
When a country needs to resort to reserves, it is essential that the assets are solid and secure. Even if a fraction of the reserves were applied to recognizably volatile assets, it would compromise the credibility of the monetary authority. After all, the function of reserves is precisely to ensure stability and trust. In this way, including cryptocurrencies in the reserves could generate reputational risks and weaken the perception of solidity of monetary policy.
Furthermore, according to him, there is the regulatory issue and there is still a lack of clear provisions that allow considering Bitcoin and other cryptocurrencies as eligible assets to officially compose the portfolio of a central bank.
Ministry of Finance is 'pro'-bitcoin,$BNB $ETH $BTC
