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Bitcoin and other digital cryptocurrencies could replace traditional safe haven assets like gold, according to the Bank of Singapore.

Mansoor Mohi-uddin, the bank’s chief economist, wrote in a research note that the finite supply of bitcoin meant investors are increasingly looking towards it to bolster their portfolios, though a number of regulatory and reputational challenges remain.

The flight from bitcoin at the start of the pandemic was only temporary and the cryptocurrency bounced back to be one of the best performing assets of 2020.

2020 saw a huge surge in interest in bitcoin from institutional investors, as well casual investors attracted by the ease of purchasing and storing cryptocurrencies compared to precious metals.

Such sentiment was demonstrated by a recent study compiled by SimpleMoneyLife, which found that 67 per cent of millennials prefer holding bitcoin to gold.

The Bank of Singapore note, first reported by The National News, dismissed bitcoin as a viable option to displace traditional fiat currencies like the US dollar due to its volatility and the resistance of governments towards challenges to their monetary sovereignty.

“Governments are very wary of any technology that could potentially displace national currencies,” Mr Mohi-uddin said.

“This would reduce the ability of policymakers to print money during economic crises.”

By contrast, the fact that bitcoin is not subject to inflationary measures like quantitative easing makes it a highly suitable candidate to function as a store of value.