Cryptocurrency pioneer Nick Szabo said central banks could soon turn into cryptocurrencies to strengthen their reserves, according to Finance Magnates on January 9th.
Szabo is a veteran cryptographer, having developed the concept of "BitGold" – a digital currency focused on privacy, not implemented, pre-Bitcoin (BTC) in 1998. It is also the first to conceptualize smart contracts, in 1996 – well ahead of their sector-level traction – and remains one of the leading thinkers in the cryptographic sphere.
In the remarks following his presentation at the Bitcoin Israeli summit at the University of Tel Aviv, Szabo proposed that in 2019 – in a context of increasing geopolitical uncertainty – cryptocurrencies may be seen as a viable alternative to current reserve names of the central bank, claiming:
"There will be some situations where a central bank can not trust a central bank or a foreign government with its own bonds, for example, one solution that has been developed is to have the Swiss government in your hands – it's not a minimized trust solution: the Swiss government itself is subject to political pressure and therefore a more reliable and minimized solution is the cryptocurrency ".
The reserves of central banks, which may hold national or foreign legal currencies, or other international reserve assets, such as special drawing rights (SDR), government securities or company shares, constitute an integral bulwark of the existing financial system and are used for past liabilities, provide support against economic risk and influence monetary policy.
Szabo has isolated physical gold in particular as vulnerable, citing the previous historian of the Nazi plunder of Europe's gold reserves, beginning with Austria in 1938.
In further comments, Szabo predicted that encrypted adoption would increase in countries where economic mismanagement caused the disastrous devaluation of the national currency and / or inflation, as well as in politically ostracized states bent by pressure of international sanctions.
Turning to the current state of technological development in the cryptography sector, Szabo expects that 2019 will introduce a greater adoption of second-level solutions such as Lightning Network.
According to Cointelegraph correspondent on the scene, Szabo's comments were accelerated by a divisive opening speech by Avi Simhon, head of Israel's National Economic Council and senior economic policy adviser to the country's prime minister.
As reported Tuesday, the economist had opened the Israel Bitcoin summit by denouncing Bitcoin as inherently inefficient, predicting the disappearance of the cryptocurrency.