There’s no denying that cryptocurrencies are the hot topic in the market, wherever you are. This is something even regulators and financial institutions all over the world acknowledge. The Bank of International Settlements (BIS) is no different and has recently published a paper in which it looks at the possibility of a Central Bank of Cryptocurrencies (CBCC).
The paper was published taking into account the enormous popularity of cryptocurrencies. Bitcoin is the largest cryptocurrency and has seen a 300% rise in its price this year alone. Ethereum is another blockchain technology that enjoys widespread support and has seen its price go up by more than 3,000% since inception. If you thought that you knew just how much a frenzy cryptocurrencies are today, these figures would surprise you still. It’s truly mind-boggling.
The paper by BIS considers all aspects of making CBCC a reality. There are a lot of things to consider for central banks if they are to include cryptocurrencies to their mix of monetary options. The current cash and reserves options have their own advantages are disadvantages, but they have been around for a long time now. Cash transactions provide anonymity to the parties involved since no one sees what you are doing. Electronic transactions are much more transparent and efficient.
Cryptocurrency payments have the anonymity of cash transactions and the efficiency of electronic transactions. The identities of those involved in the transaction are can be hidden, as well as the nature of the transaction. This anonymity which cryptocurrencies can offer, as well as their decentralized nature, is a part of what attracts customers to use them. If central banks are to adopt cryptocurrencies in the mix, they have to decide exactly how they will form a hybrid, because they can’t simply include cryptocurrencies as they are.
To provide for a good combination, central banks are contemplating the idea of two versions of CBCC, namely retail version and wholesale version. The wholesale version will be only for financial institutions, while the retail version will be for universal usage. The privacy and anonymity through cryptocurrencies could help retail users avoid identity theft, while it would also make things more efficient in the wholesale version with lesser costs of the transaction. However, privacy and anonymity here can be as bad as they can be good.
This is due to the anonymous nature of cryptocurrency payments, which make it quite simple to use them for funding criminal activities. Terrorist funding using cryptocurrencies is a big concern for governments and regulators. Banks will have to control that to some extent, like requesting users to give some sort of personal identification. However, some of the early members of the cryptocurrency community still feel that this defeats the very purpose of using a cryptocurrency.
At the moment, This is no more than an idea and a lot of work will have to go into making CBCCs a reality. If cryptocurrencies are involved without any change, current developers will face a mammoth task to battle the provision of a trusted institution allowing cryptocurrency transactions and at much less volatile prices.
The paper was published taking into account the enormous popularity of cryptocurrencies. Bitcoin is the largest cryptocurrency and has seen a 300% rise in its price this year alone. Ethereum is another blockchain technology that enjoys widespread support and has seen its price go up by more than 3,000% since inception. If you thought that you knew just how much a frenzy cryptocurrencies are today, these figures would surprise you still. It’s truly mind-boggling.
The paper by BIS considers all aspects of making CBCC a reality. There are a lot of things to consider for central banks if they are to include cryptocurrencies to their mix of monetary options. The current cash and reserves options have their own advantages are disadvantages, but they have been around for a long time now. Cash transactions provide anonymity to the parties involved since no one sees what you are doing. Electronic transactions are much more transparent and efficient.
Cryptocurrency payments have the anonymity of cash transactions and the efficiency of electronic transactions. The identities of those involved in the transaction are can be hidden, as well as the nature of the transaction. This anonymity which cryptocurrencies can offer, as well as their decentralized nature, is a part of what attracts customers to use them. If central banks are to adopt cryptocurrencies in the mix, they have to decide exactly how they will form a hybrid, because they can’t simply include cryptocurrencies as they are.
To provide for a good combination, central banks are contemplating the idea of two versions of CBCC, namely retail version and wholesale version. The wholesale version will be only for financial institutions, while the retail version will be for universal usage. The privacy and anonymity through cryptocurrencies could help retail users avoid identity theft, while it would also make things more efficient in the wholesale version with lesser costs of the transaction. However, privacy and anonymity here can be as bad as they can be good.
This is due to the anonymous nature of cryptocurrency payments, which make it quite simple to use them for funding criminal activities. Terrorist funding using cryptocurrencies is a big concern for governments and regulators. Banks will have to control that to some extent, like requesting users to give some sort of personal identification. However, some of the early members of the cryptocurrency community still feel that this defeats the very purpose of using a cryptocurrency.
At the moment, This is no more than an idea and a lot of work will have to go into making CBCCs a reality. If cryptocurrencies are involved without any change, current developers will face a mammoth task to battle the provision of a trusted institution allowing cryptocurrency transactions and at much less volatile prices.