View: Central banks shouldn’t be in the business of cryptocurrencies

By in Expert on November 26, 2017
  • In its recent quarterly review, the Bank of International Settlements asked central banks to consider whether cryptocurrencies might make sense for them. Central banks, however, are intrinsically conservative bureaucracies.
  • I’m worried about central banks taking on unnecessary risky projects, thereby rendering them too cautious in other areas. An additional reason for skepticism stems from the nature of crypto assets.

INDIATIMES writes (key points selected):

In its recent quarterly review, the Bank of International Settlements asked central banks to consider whether cryptocurrencies might make sense for them.Central banks, however, are intrinsically conservative bureaucracies.

Central banks will feel some anxiety at having to manage a crypto project.

I’m worried about central banks taking on unnecessary risky projects, thereby rendering them too cautious in other areas.An additional reason for skepticism stems from the nature of crypto assets.

There is a version of bitcoin, Bitcoin Cash, that changed the initial rules to be better suited as an exchange medium, but it isn’t nearly as popular.If you think of these assets as “cryptocurrencies,” central bank involvement will seem natural, because of course central banks do manage currencies.

Arguably these innovations come closer to being substitutes for corporations and legal systems than for currencies.Put in those terms, an active (rather than merely supervisory) role for central banks in crypto assets is suddenly far from obvious.

Consider other financial innovations: Does anyone suggest that central banks should run their own versions of ETFs or high-frequency trading?

Is there a need for central banks to start managing the development of accounting and governance systems?Finally, bitcoin and other crypto assets are still in the midst of rapid evolution, with basic questions still unanswered.

Are there any circumstances when it should be possible to revise transactions on a blockchain Because crypto assets are not large enough to pose systemic risks for economies, it’s best to let markets try to figure out the answers to these and other questions.

Innovation is likely to slow down.In general, I think the central banks in the world’s developed economies have done a pretty good job.

But consider a simple question: Would any central bank have had the inspiration or taken the risk of initiating the bitcoin protocol in the first place?So why should central banks be given a commandeering position in steering these evolving innovations?

Read the full article: https://economictimes.indiatimes.com/markets/stocks/news/view-central-banks-shouldnt-be-in-the-business-of-cryptocurrencies/articleshow/61806261.cms

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