Growing Cryptocurrency Markets Means Central Banks Need to Consider Bitcoin
The Bank of International Settlements (BIS), often known as the central banks’ central bank, used their quarterly report to encourage global central banks to consider their approach to growing cryptocurrency markets.
“In less than a decade, bitcoin has gone from being an obscure curiosity to a household name. Its value has risen – with ups and downs – from a few cents per coin to over $4,000. In the meantime, hundreds of other growing cryptocurrency markets — equalling bitcoin in market value – have emerged,” the report said.
BIS’s report discussed the growing cryptocurrency markets, strong cryptocurrencies such as Bitcoin and Ethereum, and addressed questions of privacy, efficiency and stability when assessing digital cryptocurrencies.
“Central banks will have to consider not only consumer preferences for privacy and possible efficiency gains — in terms of payments, clearing and settlements — but also the risks it may entail for the financial system and the wider economy, as well as any implications for monetary policy,” the BIS said.
The report also addressed the possibility of banks issuing their own digital currencies in the near future.
Jens Weidmann, the head of Germany’s Bundesbank, stated earlier this year that he believe that central banks will eventually create their own digital currencies to reassure average citizens that digital currencies are safe and stable. While such a move would be a logical next step, Weidmann also pointed out that cryptocurrencies have the potential to make any future financial crises even more devastating in the future.
“Allowing the public to hold claims on the central bank might make their liquid assets safer, because a central bank cannot become insolvent,” he said in a speech in June.
Some central agencies have chose to take an alternate stance, with regulators in China, South Korea, Hong Kong and Great Britain moving to reign in or completely ban Initial Coin Offerings, in an effort to limit the amount of coins in the crypto space.
While it issued no statement for or against new currencies, BIS did state in their report that central banks must think seriously about their approach to the growing cryptocurrency markets.