Cryptocurrencies and the digital assets ecosystem are often questioned for its long-term credibility and trade functionality. Adding fuel to the fire, a prominent Bitcoin [BTC] critic listed out the risks associated with central banks issuing their own virtual assets, which could result in “huge operational consequences” and undermine monetary policy-making.
Agustin Carstens, the General Manager of the Bank of International Settlements, recently stated that if central banks initiate the launch of their own cryptocurrencies, it would create financial panic among people. The users would transfer their money assets to accounts with monetary authority from established banks, which would undermine the system.
“There are huge operational consequences for central banks in implementing monetary policy and implications for the stability of the financial system. Central banks do not put a brake on innovations just for the sake of it. But neither should they speed ahead disregarding all traffic conditions.”
Agustin had previously compared the Bitcoin market to “a bubble, a Ponzi scheme, and an environmental disaster.”
He added that the other potential consequences of using Bitcoin would be its impact on interest rates, which in turn will affect the public’s demand for money, eventually resulting in larger bank balance sheets. This might eventually end up affecting financial market liquidity, he said.
The recent surge in crypto-popularity, hyperinflation of fiat currencies in countries like Venezuela, and the drop of utilization of cash payments in places like Sweden have raised concerns over whether central banks would consider the supplementation of virtual tokens to replace their bank notes.
However, Christine Lagarde, the IMF Managing Director, praised the digital tokens issued by central banks. She stated,
“I believe we should consider the possibility to issue digital currency. There may be a role for the state to supply money to the digital economy.”
JP Morgan Chase previously announced the launch of the first stablecoin under the control of a major bank, earlier this year. The coin was, JPM Coin, was designed to settle payments instantaneously between bank’s customers and users.
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US 2020 Presidential Candidate promises to provide better regulatory clarity on cryptocurrency market
Andrew Yang, the United States 2020 Democratic Presidential candidate, released a new policy for the regulation of the cryptocurrency space on April 20. The new policy statement titled ‘Crypto/ Digital Asset Regulation And Consumer Protection’, emphasized on the need for regulating the digital asset place, and also listed the actions Yang would do for the cryptocurrency market as the President.
Yang said on Twitter,
“New Policy #22 – Digital Asset/Cryptocurrency Regulation. Investment in cryptocurrencies and digital assets has far outpaced our regulatory frameworks. Investors need to know what their treatment will be in order to properly innovate in the U.S.”
On the official site, Yang stated that the cryptocurrencies “have quickly grown to represent a large amount of value and economic activity”. He further spoke about the lack of regulation of the cryptocurrency space, adding that the “patchwork of varying regulations” introduced by states has made it “difficult for the US cryptocurrency market” to compete with any other market, importantly China and Europe.
The Presidential Candidate further listed three key problems that needed to be solved, growth of cryptocurrency market being faster than that of the government’s response, differing regulations in different states, and uncertainty of the framework that would be unveiled.
Fang, a Twitter user, said,
“A candidate that is actually in touch with technology, blockchain and crypto. I missed the Bitcoin train but got in early on Ethereum mining: A significant % of my net worth is in crypto. So far I’ve done nothing but HODL. Our government has no idea what to do with digital asset”
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