For most of its short life, bitcoin was a toy for computer gaming, and banks and governments largely ignored it. That all changed at the end of 2017, when an epic comeback led prices to new peaks. Since then, central banks have been focusing more on cryptocurrencies, especially in recent months, as Facebook threatens to usurp its domain.
Bankers need their own cryptocurrencies
The benefits of digital currency are clear, faster and more efficient payments are good news for everyone. Banks are already making big profits by moving people’s money, and digital cash will help them even more.
Facebook shook the world’s regulator cages and woke up to bankers. If they can’t improve their archaic and expensive transmission mechanisms, which are mainly based on SWIFT, better alternatives will emerge.
There is an obvious demand for cryptocurrencies such as Libra, but Facebook’s responsibility is clearly not enough. Bitcoin does exactly what it needs to do, but price volatility continues to prevent daily use, and most are unpleasant.
The central banks of China, Sweden, the Bahamas and Thailand are experimenting with their own cryptocurrencies and many will soon be launched. The Federal Reserve is still waiting for the margin, according to Bloomberg, and is likely to be governed by a number of regulations that hinder innovation.
The threat to national sovereignty by the social media giant was big enough to offset the avalanche of critics for its Libra project. There was also the danger that central banks would not be able to effectively manage monetary policy (printing more money) if an alternative global currency existed.
Central banks are looking for wholesale solutions that limit the availability of any stable currency to banks and financial institutions. They will be used internally to make payments in the current money system faster and cheaper.
The retail solution would be to allow account holders to use digital currency under tight control. The Central Bank administers the General Directive and has complete control over the supply and outflow of any stable currency developed by it.
Before China’s rigging
China is likely to be the first major country to launch its own central bank cryptocurrencies as Asia moves ahead with innovative research and development. However, no start time has been set yet. The PBoC hiring announcement says it wants to hire six other technology experts with experience in cryptography, econometrics and microelectronics to join the bank’s new cryptocurrency development.
China’s position on decentralized encryption assets such as Bitcoin and Ethereum has not changed. This still won’t allow people to buy cryptography with fiat. Central banks are unlikely to see public cryptocurrencies as a good prospect as they are beyond state control and have no such transaction limits.
Whether or not the scale is moving forward is now questionable, but Facebook has accelerated the research process of the World Banks, and it is likely that a series of centrally stable currencies will be launched in the coming years.