Daily Management Review

The Governor of BoE Points Out ‘Fundamental Problem’ With Central Banks Issuing Cryptocurrencies For General Public


12/22/2017


Carney thinks that pushing crypto-currency for the public use by central banks could risk “financial stability”.



According to the governor of BoE, Mark Carney “fundamental problems lie with the “idea of a digital currency issued by a central bank” for public use.
 
Some economists have predicted that in the future, crypto-currencies like bitcoin could be in use “across entire economies” once central banks start creating them. However, Carney sees more scope for improvement in the blockchain technology especially in “the way transactions are conducted between financial institutions”.
 
Furthermore, he clarified that rolling out “such an approach” into the entire country result in “financial stability risks”. In the present system central banks are already using “electronic money”, whereas only “a small proportion of their assets are now backed by gold”, while the exchange takes place in “a centralised fashion”.
 
With cryptocurrencies coming into play parties can directly make payments whereby eliminating the need of any “central intermediary” as the “shared ledger” of blockchain technology “verifies, records and settles transactions in a matter of minutes”. As a result, consumers with “central bank-issued cryptocurrency” can open bank accounts in any bank.
 
While, Carney added:
“You (could) create a situation where you can have an instantaneous (bank) run. So as soon as there were any concern, people can switch in their account at the Bank of England”.
 
This way, the BoE could land up with huge deposit volumes requiring the need to be invested into “different assets”. Carney continued:
“There are many talents of the Bank of England, but I think credit allocation across the entire economy would not be a good idea. So there are some fundamental problems if you push the retail design all the way down, unless you restrict the amount that people have.”
 
According to the September statement of the “Bank for International Settlements”, it found the time to be still early for taking any decision on starting the cryptocurrency issuance of central banks. Reuter further reported:
“It (Bank for International Settlements) concluded that the peer-to-peer nature of the technology meant that a cryptocurrency for consumers could enable the anonymity that cash currently provides. But if that were not considered important, it said, it was unclear what further benefits it could provide”.
 
In Carney’s words:
“At present, we don’t view it as a financial stability issue.”
 
While referring to the “combined value of bitcoin and other cryptocurrencies” being nearly “half the market capitalisation of Apple Inc”, he added:
“So it’s significant ... but it’s more like an equity-type risk that’s spread fairly widely around the world.”
 
 
 
References:
reuters.com







Science & Technology

China is developing technology to capture greenhouse gases

IEA: The growth of renewable energy is slowing

Google introduces new smartphone and beta Android Q

SpaceX’s Dragon Crew Capsule Test Met With Anomaly

New Security Study Finds Millions Use 123456 As Password For Email Accounts

The Devastating Panama Disease Could Spell Extinction For Bananas

Walmart to hire 4 thousand robot cleaners

Samsung Galaxy Fold: Expensive but fragile

USA and South Korea launch the first commercial 5G networks

Deliveries of AR/VR devices to grow by 54% in 2019

World Politics

World & Politics

The Earth Is ‘Not On Track’ To Tackle Global Warming: The U.N. Secretary General

Is Finland’s aging population turning the country into Japan?

The United States will impose new duties on Chinese goods on Friday

Jyrki Katainen: EU is not a milk cow

Oil lobby and the planet's future

Trump files a lawsuit against Deutsche Bank and Capital One

Trump Urged Abe To Influence Japanese Auto Firm To Produce More Vehicles In The U.S.

IEA: Iraq will enter the top three oil leaders