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Currencies Around the World Are Going Digital

AngelaRoberts

Written by Angela Roberts

Jun 29, 2023

On June 26, 2023, the chairman of the Swiss National Bank (SNB) announced that the central bank would soon issue a new central bank digital currency (CBDC) on Switzerland’s SIX digital exchange. While the release is part of a pilot program, chairman Thomas Jordan said that “this is not just an experiment” and that the digital currency will be a “real money equivalent to bank reserves.”

Meanwhile, on June 6, 2023, Reuters reported that Hong Kong’s central bank, the Honk Kong Monetary Authority, is set to test the use of their digital currency in its $229 billion mortgage market, “with an aim to slash a month-long loan approval process by half.”

With central banks around the world, including the Federal Reserve, exploring or issuing their own digital currencies, many of our clients are growing concerned about the future of their wealth and, perhaps more importantly, their privacy.

Central bank digital currencies may be the future, but they aren’t without risk.

Open padlock on computer motherboard

According to a June 6, 2023, article by Forbes, the U.S. government is still in the exploration phase of creating a digital dollar, with Treasury secretary Janet Yellen saying that a digital currency could help speed up our nation’s payments infrastructure and lower transaction costs. The article goes on to point out that the United States is actually a “latecomer to the CBDC party,” with China, the Bahamas, Australia, Thailand, Brazil, India, South Korea, and Russia all running or preparing to launch their own CBDCs.

But here in the United States, worries persist over the potential effects of a digital currency on consumer privacy. “Privacy advocates,” the Forbes article states, “worry that digital currencies would give governments too much control over how and where people spent their money. Many see them as the ultimate tool of government financial surveillance.”

Managing or tolerating risk is a requirement in many aspects of our financial lives. When I choose which assets to include in my portfolio and in what quantities, I weigh the potential benefits of holding those assets against the potential financial risks involved. That’s why, in a world where digital currencies almost seem inevitable, I prefer to keep a portion of my portfolio allocated to physical assets like gold.

Even as they roll out digital currencies, central banks are looking to gold to protect their holdings.

Rows of gold bars

In 2022, central bank demand for physical gold broke records, according to the World Gold Council (WGC). In addition, on May 30, 2023, the WGC released the results of their 2023 survey of central banks, which showed that “7 in 10 central banks surveyed believe that gold reserves will increase in the next 12 months,” with another 28% saying they believe gold reserves will remain unchanged.

In other words, central banks aren’t putting all their eggs in the digital basket. In fact, they seem to be hedging against market volatility and uncertainty by holding on to—or increasing—their stores of physical gold. To me, the lesson here is clear: Regardless of how countries decide to utilize new and emerging technologies in the financial sector, there will always be a place for finite, physical assets like gold.

Adding physical gold to your portfolio can help preserve your wealth and your privacy.

Gold represents a way to privately store a portion of your wealth using a physical asset that exists outside the traditional banking system. It has been used in this capacity—as a store of wealth—for thousands of years and is a key component in many generational wealth strategies.

If you’re concerned about what centra bank digital currencies may mean for your own financial privacy or the future of your portfolio, I encourage you to call U.S. Money Reserve today and explore the many benefits of owning physical gold and other precious metals.

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