By Bill Taylor/Contributor
There seems to be a hint of nervousness creeping into central bankers’ beautiful wood-paneled offices.
Could global central bankers be waking up to the (gasp) possibility of losing control of their country’s monetary policy? Or, worse, not getting to go to all those fancy dinners with all the other bankers in beautiful cities around the world? Or maybe both?
Cointelegraph is reporting that over the past several months, the IMF’s (International Monetary Fund) Managing Director, Christine Lagarde, has become more vocal about regulating cryptocurrencies in order to blunt their competition to traditional fiat currencies. Of course, the first line of defense to any potential competition is to regulate and there is certainly no lack of support for that. Problem: how do you regulate a decentralized global blockchain network? The simple answer is you can’t, which is why cryptocurrencies (and bitcoin specifically) were originally designed.
So, how do central banks compete with the cryptos, realizing that regulations can only go so far? Dong He, the Deputy Director of the Monetary and Capital Markets Department at the IMF (whew, think he wants to give THAT title up?) believes central banks should issue their own digital currencies (CBDC…..Central Bank Digital Currency) to “make their money more attractive to use as a settlement vehicle”. By the way, several countries are already beginning to do just that. Again, to quote Mr Ho:
“For example, they could make central bank money user-friendly in the digital world by issuing digital tokens of their own to supplement physical cash and bank reserves. Such central bank digital currency could be exchanged, peer to peer in a decentralized manner, much as crypto assets are.”
Now, not to try and “outthink” the IMF folks, but painting a 1960 Volvo a spiffy new modern color will NOT make it a new car. Additionally, any central bank can just mine new tokens just like running the proverbial printing press. Bitcoin was ‘created’ to cap the supply, be totally decentralized and not subjected to a myriad of regulations.
No wonder central bakers are a touch nervous.
Bill Taylor is Managing Partner at Fintek Capital & a frequent contributor to FintekNews