After nine years from the starting of bitcoin, the world’s central banks are increasingly talking about the drawbacks of digital currencies and the potential problems associated with them. The guards of the world economy singled out two groups of issues that need to be addressed. The first question is how to react to the emergence and growth of private crypto-currencies, attracting more attention and how to deal with bitcoin, which now costs more than $ 19,500, and with recently launched futures that mark the latest trends. The second question: is it worth to issue official (state) versions of the crypto currency.
Bloomberg has prepared a compilation of how the world’s largest central banks consider these topics.
USA: Confidentiality raises questions
The research of the Federal Reserve System for crypto-currencies is at the earliest stage, and the bank has never shown enthusiasm for bitcoins. Jerome Powell, which is the board member and candidate for the presidency of the FRS, said earlier this year that technology has problems and “management, including risks, will be critical.” Powell noted that there are “significant challenges” that need to be addressed before planning the launch of government crypto currency. According to him, problems of confidentiality could be solved within the framework of private crypto-currencies.
Vice President for Supervision in the Federal Reserve Randal Quarles said earlier that the department should think about regulating bitcoin. Speaking before the Senate in November, he said that at some point bitcoin “will start to matter” in the context of monetary policy, adding that while the crypto currency is “simply not represented on a sufficient scale.”
Eurozone: Not a currency, but a medieval tulipmania
The European Central Bank has repeatedly warned of the danger of investing in digital currencies. His vice-president Vitor Constancio said in September that bitcoin isn’t a currency, but “medieval tulipmania”, hinting at a bubble of the XVII century in the Netherlands. His colleague Benoit Kerr warned about the unstable price of bitcoin, about his connection with tax evasion and crime. ECB President Mario Draghi said that now the impact of digital currencies on the economy of the euro area is limited and that it don’t pose a threat to the monetary monopoly of central banks.
China: Terms have matured
China made it clear: the central bank is in full control of the situation with the crypto-currencies. Based on its research, which has been conducted since 2014, the People’s Bank of China has come to the conclusion that “the conditions for mastering this technology have matured.” However, at first, China defeated everything that was associated with private crypto-currencies in its territory, banning exchange trading by bitcoins and altcoyins. Although there is still no official date for launching digital currencies, the authorities claim that they will increase the efficiency of payments and provide more precise control over the currencies.
Japan: Discussion and study
In October, the Governor of the Bank of Japan (BOJ) Haruhiko Kuroda said that the department doesn’t have an urgent plan for issuing digital currencies, although it is important to deepen knowledge about them. “The release of the CBDC, the digital currency of the central bank, to the general public is the same as if the central bank gave access to its accounts to everyone,” Kuroda said. “Thus, the discussion of our own digital currency raises many fundamental questions for the central bank.”
Germany: Speculative Game
In a country where many people still prefer to pay in cash, the Bundesbank is especially wary of bitcoins and other virtual currencies. Member of the Board of the Bundesbank Karl-Ludwig Thiele said in September that bitcoin is “a speculative toy more than a form of payment.” He believes that the transfer of deposits into the block chain system would disrupt the business model of banks and would turn the monetary policy on its head. At the same time, the Bundesbank is actively studying the application of this technology in payment systems.
United Kingdom: A Potential Revolution
The Governor of the Bank of England, Mark Carney, called the crypto-currency a part of a potential revolution in the sphere of finance. Last year the central bank, following the example of the Silicon Valley, created an accelerator of financial technologies to support young companies. Carney says that the technology based on the block chain demonstrates “great prospects”, allowing central banks to strengthen protection from cyberattacks and improve ways of making payments between institutions and consumers. Nevertheless, he warned that the bank is far from creating a digital version of pounds sterling.
France: Great caution
In June, the head of the Bank of France, Francois Villeroy de Galkhau, said that French officials “advise us to treat the bitcoin with caution, because there is no state institution behind it; all examples of private currencies in history have ended badly. “ Bitcoin even has a “dark side,” he said, referring to hacker attacks, and warned that people using crypto-currencies “do this at their own peril and risk.”
India: Violation of the rules
The Central Bank of India is against crypto currency, stressing that they can become a channel for money laundering and terrorist financing. Nevertheless, there is a group in the Reserve Bank of India studying digital currencies. It must to find out if crypto-currencies, supported by global central banks, can be used as a legitimate means of payment. While the use of digital currencies in India is considered a violation of foreign exchange rules.
Brazil: Innovation Support
The central bank of Brazil doesn’t see “an immediate risk to the country’s financial system,” but the use of these currencies is cautious, the November statement said. The bank promised to “support financial innovations — including new technologies that will make the financial system more safe and efficient.”
Canada: Crypto-currencies as assets
Senior Vice President of the Bank of Canada Carolyn Wilkins, who conducts research on crypto-currencies, said in a November interview that digital currencies can not be considered true forms of money. “In fact, these are assets or securities, and they need to be treated appropriately,” Wilkins said. She considers the technology of distributed registries as a way to improve the efficiency of the financial system.
South Korea: Corruption of the youth
The attention of the Bank of Korea is focused on protecting consumers and preventing the use of crypto currency as a tool for criminals. Deputy Governor Shin Ho said in November that more research and monitoring are needed. The Prime Minister of Korea recently warned that crypto-currencies can spoil the country’s youth.
Russia: The Pyramid
The Central Bank of Russia expressed concern about the potential risks associated with digital currencies, and Elvira Nabiullina, the Central Bank chairman, said: “We don’t legalize the pyramids” and noted that it’s strongly against equating the crypto currency with foreign currencies, because they aren’t consists with “economy, which produce them. “The Bank of Russia doesn’t hurry to make a decision on the regulation of crypto-currency financial instruments, unless President Vladimir Putin instructs it to do so earlier. According to Deputy Chairman of the Central Bank Sergey Shvetsov, the Central Bank will cooperate with the Prosecutor General’s Office to block sites that allow retail investors to access bitcoin-exchanges.
Australia: Speculative mania
The head of the central bank of Australia criticized the digital currencies in his speech in Sydney on December 13, arguing that crypto-currency assets are more interesting to criminals than to consumers. “The current hobby for crypto currencies seems to be a speculative mania rather than a desire to use them as an effective and convenient form of electronic payments,” said Philip Lowe, managing director of the Reserve Bank of Australia (RBA). According to Lowe, the bank doesn’t plan to issue its digital currency, since there is no such need. He said that the RBA is in close contact with banks in other countries and doesn’t yet see cases of introduction of electronic banknotes.
Turkey: An Important Element
Digital currencies can contribute to financial stability, provided they are properly developed, said in November Murat Cetinkaya, the head of the Central Bank of Turkey. They create new risks for central banks in the area of money supply control and price stability, but can become an important element of the non-cash economy. The used technologies, according to the chief Turkish banker, will help make payment systems more efficient.
Netherlands: The Boldest
The Dutch were always bolder than others in experiments with digital currencies. Two years ago, the country’s central bank created its own crypto currency called DNBcoin for internal turnover, to understand better how does it work. Presenting the results last year, Ron Berndsen, which was in charge of the project, said that the use of block chain could be “natural” for resolving complex financial transactions.
Scandinavia: Exploring Opportunities
Like the Netherlands, Scandinavian countries are at the forefront of developing digital money at the state level. Swedish Riksbank, the oldest central bank in the world, is studying various variants of crypto-currencies, including the electronic crown on a distributed registry — with balances in centralized database accounts, as well as on plastic cards and in applications. As they say in the bank’s report, the introduction of e-crown doesn’t represent “serious obstacles” for monetary policy.
With the decrease of cash, Norwegian Norges Bank is considering such opportunities as individual accounts with the central bank, plastic cards or payment applications, the May report says. Danish initial enthusiasm subsided somewhat, and the deputy head of the country’s chief bank, Per Kalezen, warned central banks of offering digital currencies directly to consumers. One of his arguments was that such direct access to the liquidity of the central bank could facilitate a massive withdrawal of deposits from commercial banks during the crisis.
New Zealand: So far too unstable
Head of the Reserve Bank of New Zealand Grant Spencer warned that the grandiose profits of the holders of bitcoins look like a speculative bubble. “Digital currencies are a real and serious offer,” Spencer said in an interview with TVNZ on December 10. “I think that they’ll become a part of the future, but it will not be the same what we now see in bitcoin.” In general, the central bank of New Zealand is exploring the possibility of issuing its own digital currency.
Morocco: Breaking the Law
In Morocco, it’s believed that all transactions involving virtual currencies violate the exchange rules and are punishable by law. Crypto-currencies are a hidden payment system that isn’t supported by any institution and is associated with significant risks for users, the authorities said in November.
Bank for International Settlements: Can not be ignored
The central bank for central banks (BIS) said that the authorities can not ignore the growth of the crypto currency: they will have to consider whether it makes sense at some point to issue their own digital currencies. “Out of curiosity, bitcoin has become a recognizable brand,” BIS said in September. The Bank believes that one of the possible options is a digital currency available to the public, provided that only the central bank can issue coins directly convertible into cash and reserves. However, in this case there is a risk of massive withdrawal of deposits, and commercial lenders may face a shortage of deposits. There are also possible problems with confidentiality.
Agustin Carstens, member of the board of directors of BIS, told Bloomberg that bitcoin deserves close attention:
Things which are developed as quickly as bitcoin, and don’t give a clear idea of what is behind them, at least make us raise eyebrows.
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