Should Cryptocurrencies Be Included in the Portfolio of International Reserves Held by the Central Bank of Barbados?

27 Pages Posted: 19 May 2016

See all articles by Winston Moore

Winston Moore

University of the West Indies, Cave Hill

Jeremy Stephen

University of the West Indies (Cave Hill)

Date Written: November 13, 2015

Abstract

In most countries, the central bank is required to hold reserve assets as a means of providing credibility for the value of the fiat currency. These assets can be in the form of gold, foreign exchange, or some other internationally recognised reserve asset and are held to permit the country to engage in international transactions. Within recent years, cryptocurrencies have been increasingly utilised for international transactions, and it is possible their use might expand in the future. This paper therefore examines the potential role of cryptocurrencies as part of the portfolio of external assets held by a central bank. Using the case of Barbados, the paper also provides a simulation of the effect holding some proportion of their asset base would have had on the stability of the foreign reserves as well as the return on the portfolio of assets.

Keywords: Iinternational reserves, Cryptocurrencies, Fixed exchange rate

JEL Classification: F3, E4, E5

Suggested Citation

Moore, Winston and Stephen, Jeremy, Should Cryptocurrencies Be Included in the Portfolio of International Reserves Held by the Central Bank of Barbados? (November 13, 2015). Central Bank of Barbados WP/15/16. Available at SSRN: https://ssrn.com/abstract=2775396 or http://dx.doi.org/10.2139/ssrn.2775396

Winston Moore (Contact Author)

University of the West Indies, Cave Hill ( email )

Bridgetown
Barbados

Jeremy Stephen

University of the West Indies (Cave Hill) ( email )

Cave Hill
Barbados

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