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Just last month at the Singapore Fintech Festival, the director of the International Monetary Fund (IMF), Christine Lagarde, was vouching for the digital currencies of the central bank (CBDC). He explained the various benefits present in the CBDCs as financial inclusion, security and privacy.
He also touched on the fact that cryptocurrencies like bitcoin, among others, are competing to be the currency of a new world without cash. With the explosive increase of Bitcoin in 2017 and its continuous user growth is development Throughout 2018, it is becoming clear that cryptocurrency is here to stay.
Bitcoin's revolutionary blockchain technology and its use as currency have even captured the interest of Kevin Warsh, former US Federal Reserve governor and Fed presidential candidate.
In May, Warsh told the New York Times that if he had been president, he would have explored a national cryptocurrency based on blockchain dubbed "Fedcoin".
A national cryptocurrency is a bad idea
However, others in the Federal Reserve do not share his cryptocurrency enthusiasm. In the last two years, the Fed researchers have not been convinced by cryptocurrencies and a national cryptocurrency.
Fed research, Aleksander Berentsen and Fabian Schar wrote that central banks could easily create and publish their own cryptography, but they also he has declared:
However, the key features of cryptocurrencies are a red flag for central banks. That is, no reputable central bank would have an incentive to issue an anonymous virtual currency. The risk of reputation would simply be too high
They explained that the creation of strict KYC regulations (you know your client) and AML (anti-money laundering) is necessary to prevent drug cartels, terrorists and other illegal entities from abusing its free nature.
However, even in the implementation of these regulations, they claimed that it would be hypocritical to require that kind of control by commercial or retail banks if the central bank had not practiced it.
Are the digital currencies of the Central Bank even necessary?
Berentsen and Schar have observed that centralization would be necessary in a cryptocurrency of the central bank and therefore it is not even a cryptocurrency, but rather electronic money. They said it would be misleading to call CBDC a cryptocurrency:
Once the decentralized nature of a cryptocurrency is removed, there is not much left of it. the centralized virtual currency issued monopolistically by a central bank is the electronic money of the central bank. It is worth mentioning that the money from the electronic central bank could have been offered a long time ago. The technology for the issue of virtual money in a centralized manner existed long before the invention of the blockchain.
Therefore, Fed officials do not see the need or desire to issue a national cryptocurrency or other form of electronic money. They could have done it long before Satoshi invented bitcoins and other cryptocurrencies.
And the decentralized aspect of the cryptocurrencies that makes them so unique and desirable.
For example, because bitcoin is decentralized, it does not require governance from any single entity, has an integrated economic issue, is transparent and neutral, is reliable and secure, and provides an acceptable level of privacy.
The world does not need a central bank cryptocurrency because it already has Bitcoin and a variety of altcoins that are continually building and improving on themselves.
They provide something to central banks and governments simply can not do it, and the Federal Reserve has already done so.
Do you think that governments and central banks will let Bitcoin and other decentralized cryptocurrencies dominate a society without money? Let us know what you think in the comments section below.
