Cryptocurrencies Can Be Issued
By Central Banks
Central bankers all over the world are taking a close interest in digital currencies. The reason is not financial stability: the technology behind cryptocurrencies has an extraordinary potential and is one which monetary authorities should learn to master for the future.
Monetary exchanges have developed in recent years, moving from cash to digital transactions. However, notes and coins offer a key feature which bank transfers have been unable to reproduce. It’s the anonymity of transactions. Yves Mersch, a member of the European Central Bank’s executive board, has stated that 80% of transactions in Europe are still made in cash, which is the half of the total cost.
The defining feature of cryptocurrencies is to maintain anonymity of transactions. Satoshi Nakamoto, the inventor of bitcoin, defined it as a “peer-to-peer version of electronic cash.” This quality made the cryptocurrency appealing for drug distribution and money laundering. However, it is not clear why central banks still not issue cryptocurrencies. Because, implementing them will increase the safety and efficiency of asset.
Much like bitcoin, a central bank cryptocurrency would be universally accessible, electronic and exchanged peer-to-peer. A helpful taxonomy devised by Morten Bech and Rodney Garatt at the Bank for International Settlements (BIS) suggests it should be issued by the central bank itself, rather than via a privately run algorithm. This is a crucial difference: Only the monetary authority would be able to create and destroy this “official” cryptocurrency, which would be fully convertible with cash or bank reserves.
As the digitalization of payment services grows, customers are searching for other ways for bank transferring, because they want to remain anonymous. This is a proof, that central banks must have their own alternative of bitcoin, for the purpose to support control over the money supply.
