Contents
The Central Bank of Chile's Position on Cryptocurrency
Risk Assessment and Reserve Management
The Central Bank of Chile prioritizes low-risk, liquid assets like gold and securities and excludes Bitcoin from its reserve management strategies.
International reserves aim to ensure economic stability and for this purpose require assets that meet the IMF's standards of safety, liquidity and quality.
The recent US proposal to create a national Bitcoin reserve has sparked global debate about the role of cryptocurrencies in national economies.
However, the Central Bank of Chile has publicly rejected the idea of including Bitcoin in its international reserves, highlighting the risks associated with high volatility and unregulated cryptocurrencies.
This stance was strengthened after US Senator Cynthia Lummis’ proposal to establish a Bitcoin reserve, which coincided with statements by President-elect Donald Trump, who advocated for a Bitcoin reserve during his election campaign.
The Central Bank of Chile also made evaluations regarding these developments and clarified its stance on the issue.
The Central Bank of Chile's Position on Cryptocurrency
The Central Bank of Chile has announced that it will not include Bitcoin or other cryptocurrencies in its international reserves on the grounds that they do not meet the legal criteria required for such investments.
The bank stressed that cryptocurrencies do not meet the requirements for reserve assets, which are essentially backed by more stable and regulated assets such as gold or government-issued securities.
“The proposals from the US and Brazil reflect how cryptocurrencies are entering the economic agendas of key countries. However, these initiatives also raise questions about the associated risks, especially due to the high volatility of crypto assets and the lack of regulation. This interest meant that Bitcoin’s value closed at its ATH in November. The financial asset closed November at $96,455,” the Central Bank of Chile explained.
The Central Bank of Chile stated that the main purpose of international reserves in terms of financial management is to support the country's economic stability against external financial shocks.
This goal requires that assets held in reserves meet strict safety, liquidity, and overall quality standards in accordance with International Monetary Fund (IMF) guidelines.
“International reserves are designed to maintain economic and financial stability against adverse external shocks and to conduct exchange rate policy. Therefore, according to IMF definitions, they must meet high safety, liquidity and quality criteria to ensure their availability to central banks with limited market influence and access when needed in times of crisis.”
The bank further elaborated that Bitcoin’s high volatility and regulatory uncertainties make it unsuitable for reserve purposes. It added that international reserves should be easily accessible with minimal market impact in times of economic crisis, criteria that Bitcoin does not meet.
Risk Assessment and Reserve Management
The Chilean Central Bank's conservative approach to reserve management ensures economic stability by focusing on maintaining high liquidity and low-risk assets. Chile has phased out the accumulation of gold in its reserves since 1997 and liquidated such assets completely by 2000.
Today, it holds only a minimal amount of gold bullion, reflecting a strategy to minimize exposure to volatile assets.
Bitcoin (BTC) is currently trading at $95,813, reflecting a slight daily decline of 0.05%. Over the past month, BTC has shown strong growth, gaining 38.19%, and its year-to-date gain stands at 126.76%, confirming bullish momentum into 2024. However, it remains range-bound below the psychological resistance of $100,000.
Technical Analysis:
Source: Tradingview
BTC is consolidating near the $95,000-$98,000 range, with the $100,000 level acting as a key resistance barrier. Technical indicators suggest that the bullish momentum remains intact, but low volume in recent sessions points to potential short-term consolidation.
If BTC surpasses $100,000, it could start a rally towards $110,000-$120,000. Conversely, a failure to hold the $93,500 support could lead to a pullback towards $90,000.