Regulatory Series on Cryptocurrencies: How about monetary authorities like central banks and IMF developing cryptocurrencies?

Amid an idea of the evolution of the global currency system, we are witnessing the paradigm shift from the fiat currency system to a cashless economy, wherein a power struggle is playing out between who regulates and who plays the role of issuing authority of real money in an era when corporations and individuals can create currency as easily as governments. 

At the same time, skepticism for the acceptance of cryptocurrencies is constantly engulfed, perhaps both central and retail banks are now foreseeing cryptocurrencies as a real threat to their business and economic models.

As a result, we also saw stringent actions taken by the various central banks across the globe. The recent incident is that the Indian central bank (RBI) has currently, put a blanket ban on cryptocurrencies. Back in last April, the Reserve Bank of India (RBI) instructed all financial institutions in the territory to abstain from rendering services to cryptocurrency trading exchanges and other related companies.

Elsewhere, Pan Gongsheng, the vice governor of the People’s Bank of China had also called for a wider ban on services related to cryptocurrency trading in the country.

He had stated back in January’2018, to prevent market risk, the government would apply more strict regulation to end all cryptocurrency trading-related activities and services.

On the contrary, IMF chief Christine Lagarde has stated in a recent interview with CNBC, digital assets are “shaking the system”, during his explanation, the financial system including some commercial banks have already begun to change their business models in response to the mounting interests of fintech and cryptocurrency space. 

As a result, it has prompted a shift in the attitudes of big banks and AMCs, who are attempting to strike a chord in the emerging segment. The recent instance including big players like JP Morgan, Fidelity are coming up with stable coin and custodian services to be piloted exclusively with the institutional clients, and gradually scaled towards retail use.

Well, in order to get rid of the shortcomings of crypto-space, the Swedish Riksbank and the IMF are trialing their own cryptocurrencies to explore the use of Central Bank Digital Currency (CBDC). 

The government authorities and corporate currencies can be centralized and monitored with the consent of private blockchains which is contrary to that of decentralized cryptocurrencies and ‘corporate cryptos’ would be obligated to share transaction data with government agencies to operate in an official capacity.

In such an ecosystem, a future of the digital economy is foreseen with some distinctive features: such as, Official Central Bank Digital Currency (authenticated, sole legal tender), Corporate currency, for instance: JP Morgan USD pegged stablecoins, Facebook coin (authenticated but not deemed as legal tender), Digital commodity money e.g. Bitcoin, Litecoin and commodity-backed (permissionless, unofficial but mostly legitimate), Digital cash e.g. Zcash and Monero (unauthenticated).

The St.Louis branch of the Federal Reserve published a study on bitcoin's future price path, who do often play a role as a leader at communicating cutting-edge economic research and communicating it in a simplified way or reducing complexities of economic movements. 

Director of the IMF Christine Lagarde made her notions about the benefits of central bank digital currencies (CBDCs) back in last November, wherein she stated that cryptocurrency being a contender for a cashless society, could improve security, accentuate financial functions, and afford greater privacy. Courtesy: BNC

Currency Strength Index: FxWirePro's hourly BTC spot index is inching towards 34 levels (which is mildly bullish), while hourly USD spot index was at 25 (mildly bullish) while articulating (at 12:53 GMT). 

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