We got a recent report that the ECB may have implied that crypto is not so bad after all. At least, the bank indicated that it would not be a threat to the stability of fiat money. Also, another assertion of the report is that players in the industry can easily mitigate crypto risks. Thus, showing that there are no risks in trading crypto because it is not money. If you consider what another official of ECB said, it implies that discord will soon start between them. An official of the European Central Bank outlined the benefits of issuing digital currency through the bank. A kind of “Central Bank-Backed Digital Currency CBDC.”
Statements of the England Central Bank’s Governing Council
One member of the bank’s governing council made several statements about the cryptocurrencies. Vitas Vasiliauskas spoke at length during the “Reinventing Bretton Woods Committee” in April. His topic was digital currencies and whether to make it retail, wholesale, or both.
Vitas first pointed out that the CBDC would be a store of value, a medium of exchange, and a means of payment. Already, these three characteristics are what defines the importance of money. Therefore, every currency must serve the three purposes, or it’s not money. However, the opponents of crypto keep arguing that these three features are not in the cryptocurrencies ecosystem.
Another point that Vitas made was that CBDCs could improve security settlements and payment transactions. At least, using technology can make everything more efficient. He also noted that if there is an interest-earning CBDC, it can be handy during monetary policy transmission. It will also be beneficial when deciding on the lending and deposit rates.
Cash is Dwindling, and it’s not looking right for the future of Business
Vitas Vasiliauska went ahead to note that many countries don’t have enough cash circulating amongst the residents right now. The implication, according to Vitas, is that one day, things may turn for the worst. People will have to open an account with private businesses to make any payment at all. What this situation will result in will be a financial exclusion. Vitas opines that establishing a CBDC may be the best solution to curb this limitation. Apart from that, it may lead to more financial stability in the country.
Well, the trend of thoughts is noble, and he has good intentions. However, let’s remember that the reason for establishing the Bitcoin digital currency is to eliminate control by a central body. Also, the intention was to prevent the power which operators use to change values as they wish.
From what this new idea is suggesting, cryptos will become another fiat money but in a digital form. Also, the value of the coin will be in the powers of the central bank; as such, they can control it as they wish. Moreover, the ability of the users to control value through online cryptocurrency exchanges may be lost.
What we have now is that consumers establish the values by trading crypto and not the central banks. This kind of setting is working for everybody. Let’s not forget that these banks are likely to falter at any time like what happened in Iran, Venezuela, Argentina, etc. So, this new idea may or may not go well for digital currencies.