from EconMatters, EconMatters.com
Some of the hypes and speculations surrounding bitcoin and cryptocurrency is that central banks may create their own digital currencies thus replacing fiat money altogether. A G20 draft communiqué already states cryptocurrencies “lack the traits of sovereign currencies” and seeks cryptocurrency regulation recommendations by July 2018.
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The Bank of International Settlements (BIS) also published a report last month entitled “Money in the digital age: what role for central banks?” stating:
“… while cryptocurrencies may pretend to be currencies, they fail the basic textbook definitions. Most would agree that they do not function as a unit of account. Their volatile valuations make them unsafe to rely on as a common means of payment and a stable store of value.”
Currently, cash is still king and most of the central banks have not gone into the coin business, but the usefulness of cryptocurrency has not been lost on all of us. Countries with serious currency or financial troubles may find cryptocurrency a more stable store of value providing stability to the economy.
Solving Sanctions One at a Time
For example, Iran and Venezuela are both subject to trade sanctions from the United States. Venezuela in particular is suffering from triple-digit annual inflation rate set to jump to more than 2,300 percent in 2018 according to IMF. The nation’s official currency has lost much of its value amid recent political turmoil that Venezuela came up with an oil-backed “petro” cryptocurrency and raised more than $735 million.
Iran government also announced in February that state-run Post Bank is working on developing a cryptocurrency. There are also reports linking North Korea to cryptocurrency mining and other attempts to use the digital currencies as a way to evade sanctions and that Kim Jong-un could own as much as 11,000 bitcoins worth about $87 million at today’s price.
Big Banks Strategy
Some other countries such as China, Russia and Singapore also have been experimenting with developing their own digital currencies. Banks, on the other hand, are much more cautious. The volatility of Bitcoin et al has prompted major banks like JPM and Citigroup to ban purchases of Bitcoin and other cryptocurrencies on their credit cards. But that is not to say big banks are staying away forever.
Barclays and Coinbase and Barclays just recently revealed a first major partnership between a U.K. bank and cryptocurrency exchange. This is part of the effort by Coinbase to offer clients a faster and safer payment and transfer process.
Another move by banks and financial services firms is contemplating using blockchain as a record of asset ownership replacing a series of internal ledgers. The idea is to make tamper-proof databases costing a lot less than a conventional database. Santander Bank estimates that blockchains could save banks up to $20 billion a year by 2022.
Safety and Protection
Theoretically, cryptocurrencies’ underlying blockchain technology eliminates the need for a third party and allows for instant, irrevocable and secure transactions. However, bitcoin and cryptocurrency was purposely designed with anonymity and lack of control in mind (think money laundering and terrorism financing), and user/consumer security and protection was not the main focus of the original protocol. That is one reason (among many others) why regulators around the world have widely viewed bitcoin and cryptocurrency with a critical eye.
Cryptocurrency NWO?
If crypotcurency is an asset class, then there’s a need to have cryptocurreny exchanges to trade one token or coin for another with digital encryption provides individuals with control over their data; privacy, security and fluid transfer of assets. The cryptocurrency world seems to envision a “new internet” is needed for a new “decentralized world”, which unfortunately is yet to be created/invented.
Right now, Cryptocurrencies have become more popular as trading instrument than a payment system. Bitcoin and cryptocurrency may one day become the world virtual currency on the “new internet” in the new “decentralized world”, but it is not now.
