Peru’s central bank chief, Julio Velarde, continues to express skepticism regarding cryptocurrencies, reiterating his concerns about their volatility and potential links to illicit financial activity. His comments, made during a recent event discussing the upcoming 2026 elections, underscore a cautious approach to digital assets as global markets grapple with fluctuating values and evolving regulatory landscapes.
Velarde previously stated he would not personally purchase Bitcoin, citing its inherent volatility. He reinforced this position, describing cryptocurrencies not as currencies but as assets with the potential to lose almost all of their value. This stance aligns with a broader concern among some central bankers about the risks posed by unregulated digital assets to financial stability.
His recent remarks referenced Kenneth Rogoff’s book, “Our Dollar, Your Problem,” which explores the relationship between cryptocurrencies and illegal economic activities. This allusion highlights the central bank’s focus on the potential for digital currencies to facilitate illicit transactions, a concern shared by many regulatory bodies worldwide.
Velarde’s comments come as Bitcoin experienced a significant downturn, reaching lows not seen in 15 months. From a peak of $126,186 in October 2025, the cryptocurrency has fallen by more than 45%, reflecting a broader cooling in the crypto market.
Market Factors Contributing to the Decline
The recent decline in cryptocurrency values isn’t solely attributable to inherent risks. Market analysts point to a shift in investor behavior following a loss of confidence in the U.S. Dollar. Contrary to expectations, investors haven’t flocked to cryptocurrencies as a safe haven but have instead favored traditional assets like gold, and silver.
Diego Marrero, portfolio manager at Blum SAF, explained this dynamic, stating that the fall in crypto values is linked to investors seeking refuge in precious metals rather than digital currencies. This suggests a reassessment of risk appetite and a preference for established stores of value during times of economic uncertainty.
Further exacerbating the situation was the recent nomination of Kevin Warsh by Donald Trump to lead the Federal Reserve. Warsh is perceived as adopting a more hawkish monetary policy, signaling a potential reduction in market liquidity. Reduced liquidity typically negatively impacts risk assets like cryptocurrencies.
“The new president (of the Fed) is perceived as more hawkish, meaning averse to providing more liquidity to the market. And in a context where liquidity is restricted, assets like cryptocurrencies will not perform well,” Marrero stated.
The availability of liquidity, fueled by central bank stimulus measures, previously drove up cryptocurrency prices. As those measures are withdrawn or reversed, the market is experiencing a correction. Marrero noted that a decrease in liquidity in October marked the beginning of the current downward trend.
Alberto Rocca, country manager of Buda in Peru, acknowledged the liquidity issue but suggested that investors might consider allocating a small percentage of their portfolio to cryptocurrencies, recognizing their high volatility.
Investment Strategy in a Volatile Market
Despite the recent downturn, opinions on investment strategy vary. Marrero advises against buying Bitcoin at this time, given its volatility, but doesn’t recommend selling existing holdings, urging investors to remain calm. Rocca suggests that Bitcoin could represent between 10% and 15% of a diversified portfolio, but only with a long-term investment horizon.
The Peruvian central bank’s broader economic outlook remains relatively stable. Inflation in Peru has been within the target range since April 2024, reaching 1.7% in January 2026 (year-over-year). Velarde expressed confidence that Peru will maintain lower inflation rates compared to the United States in the coming years.
Peru’s current benchmark interest rate stands at 4.25%, significantly lower than rates in other Latin American countries such as Chile (4.5%), Mexico (7%), Colombia (10.25%), and Brazil (15%). This comparatively low rate environment reflects the central bank’s success in managing inflation and supporting economic growth.
The central bank’s cautious stance on cryptocurrencies, coupled with its focus on maintaining macroeconomic stability, underscores its commitment to safeguarding the Peruvian financial system. While the global cryptocurrency landscape continues to evolve, Peru’s central bank appears determined to proceed with prudence and prioritize the protection of its citizens and economy.
