Bank of Singapore reiterated optimism about cryptocurrencies and their potential as an alternative to gold in the long-term but underlined that the current timing remains early with various challenges still unaddressed.
«We do think in the long-term, there is probably going to be a role for digital currencies essentially as an alternative to physical gold,» said Bank of Singapore’s chief economist Mansoor Mohi-uddin in a virtual briefing earlier this week
In January this year, the bank released a report lauding the potential for cryptocurrencies to act as «an alternative store of value» and its advantages over gold such as popularity with younger people or easier storage via digital wallets.
«We definitely don’t want to rule out cryptocurrencies in the long-term,» Mohi-uddin said.
«This Is Not The Time»
But in the short-term, issues like trust, volatility, regulatory acceptance and reputational risks remain unaddressed.
The bank also noted that the fast-moving nature of the asset class rendered it difficult to generate alpha effectively.
«Like any other ways of innovation, there is going to b a very high rate of failure,» said head of investment strategy Eli Lee. «Over the longer term, we could see perhaps a situation where this asset class could be more suitable for investors. But we think this is not the time.»
Overweight Equities
Overall, Bank of Singapore is positive on risk assets with a continued overweight on equities, particularly for stocks linked with cloud software and semiconductors.
Within fixed income, it is overweight in emerging markets high yield, especially selective sectors in China, due to a better risk-return profile in the current low interest rate environment.
Despite constructiveness on risk assets, Lee noted that investors should expect lower returns and higher volatility as markets navigate peaking global growth as well as peaking fiscal and monetary stimulus.
