US Treasury Recognizes Bitcoin as ‘Digital Gold’ in Latest Report
The U.S. Treasury Department recognized Bitcoin as “digital gold,” emphasizing its primary role as a store of value.
In addition to this recognition, the Treasury Department also highlighted the growing importance of stablecoins, which are driving demand for Treasury bills in the changing financial landscape.
Treasury recognizes Bitcoin and stablecoins
The Treasury report highlights Digital assets are expanding rapidly, including Bitcoin, Ethereum and stablecoinsbut noted that the market is still small compared to traditional financial instruments such as U.S. government bonds.
“Bitcoin’s primary use case appears to be as a store of value in decentralized finance, aka ‘digital gold’ (Decentralized Finance) world,” the Treasury said.
Financial regulators noted that Bitcoin has become a store of value similar to gold. According to reports, Bitcoin’s Market capitalization soared from $6.4 billion in 2015 to $134 billion in 2019, and will surge further to approximately $1.3 trillion in 2024. This growth reflects growing interest in decentralized finance (DeFi) and digital tokens.
In fact, the report comes amid a growing number of comparisons Bitcoin to Goldincluding the most recent Speech by Federal Reserve Chairman Jerome Powell. This adds to optimism in the cryptocurrency market, which sees Bitcoin as a key component of the future of finance.
However, U.S. Treasury Department Point out that most people use cryptocurrencies as speculative investments, aiming for future appreciation in value. As a result, digital currencies have yet to replace traditional assets such as Treasury bonds, which remain in high demand.
“As the market capitalization of digital assets grows, structural demand for Treasury bonds is likely to increase, both as a hedge against downside price risks volatility and serves as an ‘on-chain’ safe-haven asset,” the Treasury said.
By way of background, the Treasury report highlights the economy’s rapid expansion Stablecoin and their increasingly important role in the crypto ecosystem. More than 80% of cryptocurrency transactions involve stablecoins, which act as key intermediaries in digital markets.
Fiat currency support Stablecoin provider, e.g. Tether, which relies mainly on U.S. Treasury bonds and other treasury-backed assets as collateral. These holdings of U.S. Treasury securities represent approximately $120 billion. As the stablecoin market grows, demand for Treasury bonds is expected to rise. This is due to their use as a hedge against price fluctuations and as a safe-haven asset in blockchain networks.
Overall, the Treasury Department’s endorsement of Bitcoin and stablecoins signals a growing crossover between traditional finance and blockchain-based innovation. While the department maintains a cautious stance, its endorsement of digital assets signals a willingness to explore its potential.
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