Central banks can't ignore bitcoin boom - TechCentral

Central banks can’t ignore bitcoin boom

The world’s central banks can’t sit back and ignore the growth in cryptocurrencies as it could pose a risk to the stability of the financial system, according to the Bank for International Settlements.

It said central banks will need to figure out whether to issue a digital currency and what its attributes should be, though the decision is most pressing in countries like Sweden where cash use is dwindling.

Institutions need to take into account of not only privacy issues and efficiency gains in payment systems, but also economic, financial and monetary policy repercussions, the BIS said in its Quarterly Review.

The analysis comes at the end of a rough week for digital currencies, with JPMorgan Chase & Co CEO Jamie Dimon calling bitcoin a “fraud” and China moving to crack down on domestic trading of cryptocurrencies.

But with bitcoin and others gaining in popularity as payment systems go mobile and investors pour in money, central banks are beginning to delve into them and their underlying blockchain technology, which promises to speed up clearing and settlements. At the Bank of England, Mark Carney has cited cryptocurrencies as part of a potential “revolution” in finance.

To better understand the system, the Dutch central bank has created its own cryptocurrency, albeit for internal use only. US officials are exploring the matter, too, though in March Federal Reserve governor Jerome Powell said there were “significant policy issues” that needed further study, including vulnerability to cyberattack, privacy and counterfeiting.

According to the BIS, one option for central banks might be a currency available to the public, with only the central bank able to issue units that would be directly convertible with cash and reserves. There might be a greater risk of bank runs, however, and commercial lenders might face a shortage of deposits. Another question to be resolved would be the question of privacy.  — Reported by Catherine Bosley, (c) 2017 Bloomberg LP

2 Comments

  1. I worry about those who cannot see the risk of crypto currencies to their own well being. Swept up completely in a romanticized dialogue of taking power back for the people. There are indeed major issues still with crypto, and I believe people might not like what they get when they get what they are asking for. What they are asking for are often things like complete meltdown of the world fiat currency systems in favor of crypto – It’s hard to believe there are people out there who think that could possibly happen without years of global economic problems. Others think they will not have to pay taxes. Then when you ask them who will pay for things like fixing the streets they drive in they say they will. If you ask them how they will do it on their own they say they will group together with others to afford it and pay monthly/yearly. Then of course if you ask who will administer all these funds they say they will appoint people to do so for a portion of the contributions. And then when you point out that what they propose is no different from tax then they say tax is being misspent. Then you ask them how they will ensure their contributions are not misspent. Etc… Etc…

    People want to fix the system by reinventing it. And it will be different – But the same. Possibly with quite negative consequences in the meantime. As opposed to just fixing it.

    The best possible result for me would be if governments and central/reserve banks are hard pressed by the potential rise of crypto to fix the currencies they preside over. To keep on the straight and narrow so to speak.

  2. Embrace our Banana Republic on

    How true. Anarchy is not a fun environment to live in, except if you are comfortable with the principal of survival of the fittest in the most literal sense.

© 2009 – 2021 NewsCentral Media