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Investment Management Sovereign Currencies Meet Three Criteria Division 1) They are used as a medium of exchange. — To represent a medium of exchange, an instrument must facilitate the transaction of goods or services between parities (US$ are used to buy a barrel of oil). 2) They serve as unit of account. — A unit of account is a measurement which allows value to be accounted and compared (a barrel of WTI is worth ~$55). 3) They are a store of value. — Astore of value is an asset that can be saved, stored, and exchanged in the future for a predictable stable value (with 2% annual inflation, a nominal dollar today will be worth &82¢ in 10 years). 12 HOUSE_OVERSIGHT_025675 Source: Investment Strategy Group, Do Digital Currencies Pose a Threat to Sovereign Currencies and Central Banks?, Daniel Heller, PIIE.