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Central banks around the world have had unfavorable views on cryptocurrency, while the Spanish Central Bank, Banco de España (BDE), is an exceptional exception.
A POSITIVE IMPACT ON THE SPANISH ECONOMY
The direct general for the BDE economy, Galo Nuño, led the report. In it, he argues that blockchain technology could help track the nation's money supply. This is appropriate, since BDE is not able to keep track of all the banknotes and coins in circulation.
The relationship is restricted in its focus. It does not explore the more general impact of the use of virtual currency. It only touches on the topic, suggesting that there are "potential consequences and implications". Concerns tend to consider maintaining financial stability.
DIGITAL CURRENCY CENTRAL EMISSION-BANK (CBDC)
C & # 39; is an outlet to the cryptocutism of BDE. The report specifies that the Central Bank must monitor the digital currency. Explore the concept of digital currencies issued by central banks (CBDC). The idea of CBDC is that it is a digital form of legal currency. In other words, it is a currency established as currency by government regulation.
CBDCs differ from other cryptocurrencies. Being issued by the state, the CBDCs have legal tender status. Thus, CBDCs could compete with commercial bank deposits. It could also challenge the status quo of the current fractional reserve banking system .
BDE believes that the CBDC would give it greater control over the money supply. For example, in theory, they could control currency fluctuations.
Galo Nuño will continue to explore the use of CBDCs. Now he has the task of exploring why central banks should be interested in cryptography. He is also investigating the consequences of the introduction of digital currencies for the economy.
USING BLOCKCHAIN TO MANAGE INTEREST RATES
The report highlights a problem that central banks have at the moment. That is, to increase the money supply, they must print new banknotes. The report assumes that the switch to blockchain would help manage interest rates. This is due to the fact that the digital process would be faster and easier to handle.
But the document also sends a word of caution. It claims that traditional banks do not have a thorough understanding of cryptocurrencies. And so, they should work out with caution.
Spain's support for cryptocurrency is refreshing. Many governments and central banks are unreasonably cautious towards the cryptocurrency and blockchain innovations. It will be interesting to see how it develops.
How do central banks adopt blockchain technology? Will the CBDC concept be successful, or will something take its place?
Images kindly granted by Shuterstock
