By CCN.com: Central bankers occasionally lose their guard and reveal that they are constantly worrying they will be rendered irrelevant by cryptocurrencies. The latest proof comes from the National Bank of Romania courtesy of the central bank’s administration council member, Daniel Daianu.
According to the Business Review, the central bank official views cryptocurrencies as financial assets and nothing else. Consequently, cryptocurrencies ‘won’t be able to fulfill the basic roles of currency’. That being the case, Daianu argued, central banks will always have a role to play in society:
Cryptocurrencies will never be able to substitute the currency issued by a central bank.
Daianu went on to defend the state’s role in issuing currency saying that it was the ‘only possible last-resort lender’. In this regard, the central bank official implied that during a financial crisis, only the state can save the situation:
In markets, the state is the only possible last-resort lender. When the banking system was saved, it wasn’t crypto banks that were saved. Central banks intervened by issuing base currency, which was followed by non-conventional measures.
This statement is likely to get Daianu in trouble with crypto enthusiasts as the unhindered printing of money is what spawned cryptocurrencies as we know them today. The central bank official also revealed that centralized institutions are yet to understand the importance of the deflationary approach cryptocurrencies such as Bitcoin have taken. This was demonstrated by his statement that the central banks’ answer to cryptocurrencies is to issue a digital currency that can ‘multiply’!
Daianu was right though in saying that digital currencies are a foregone conclusion. A couple of central banks have already taken the first steps towards realizing this. Sweden’s central Riskbank last year announced a pilot program for the e-Krona would be rolled out this year. The central bank of Norway, Norges Bank, is also considering a CBDC as cash usage in the country declines.
The push for CBDCs has not just been driven by policymakers and central bankers but also by consumers. This was clearly demonstrated by a Twitter poll the Bank of England conducted late last year. According to the poll three-quarters of the respondents indicated that if they were to be gifted money they would prefer it to be in a digital currency form.
Daianu’s view that digital currencies issued by reserve banks will quell the clamor for cryptocurrencies or slow their uptake and adoption is in line with that of crypto skeptic Nouriel ‘Dr Doom’ Roubini. Last year in November, Roubini argued that cryptocurrencies will be vanquished by CBDCs.
At the time, Roubini argued that CBDCs held more advantages over cryptocurrencies including scalability and cost-effectiveness. Not everybody agreed with him.
Last modified: May 20, 2020 5:51 AM UTC