Central Bank Cryptocurrencies
Many central banks around the world are increasingly approaching their policies for technologies that use cryptocurrencies, to follow the path that moves a growing global market.
These centralized institutions are trying to implement the unique financial systems, same or similar as bitcoin-base technologies, and whose fundamental characteristic is decentralization. The reason for the adoption of the new system is to improve the ways of payment, which is a useful purpose.
And if the users welcome modern technologies in central banks and represent a greater range of possibilities and technological development, many worry about the fact that this news is capable of destroying the monetary system and the current financial flows.
Fed.Paper: Concern about anonymity and decentralized nature of the cryptocurrency
Reserve Bank of St. Louis is one of the 12 reserve banks that make the Central Bank of the U.S.; Recently, from this institution, they expressed their concern through the federal document. Their arguments for why the Bank of America should not deal with the cryptocurrencies, so how much they are contrary to the customs and business of such institutions.
The authors of this paper are Aleksander Berentsen and Fabian Schar. We are giving an overview of their explanation;
By its nature, the Central Bank cannot accept the issuance of decentralized currencies, whereby the users remain anonymous. In this way, the bank would risk operating with unknown customers who may even be involved in illegal activities. It would mean playing roulette with the reputation of such complexity institutions, which none of them would like.
Instead, the bank can issue electronic money, which differs significantly from decentralized cryptocurrencies, because it is much more in control of the bank.
If cryptocurrencies were centralized, their existence would not have the same meaning anymore. Bitcoin and similar currencies do not have a central authority, they are not responsible to any institution, but they use decentralized blockchain accounting systems. Under these circumstances, anonymity is an advantage concerning protecting users from corruptive intentions and other external influences.
However, the authors of the Reserve Bank of St.Louis document believe that such systems would disturb the existing ecosystem and financial infrastructure, assuming that cryptocurrencies should be left to the private sector, while central banks should continue in their direction.
Distinguished Opinions of the Central Banks
Let’s remind that in the past period the head leaders of other similar institutions have been advertised on this issue. The Governor of the Bank of England said that governments should place cryptocurrencies in the framework of regulatory problems.
The Bank for International Settlements, Basel, in March this year, expressed the view that helping cryptocurrencies, due to the high rise of bitcoins, would lead to the instability of the entire monetary and financial system in central banks. They urged these institutions to carry out assessments of their risks before they enter into these waters.