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Do the central banks have a digital master plan in place that will see them derail bitcoin and other cryptocurrencies before they have truly been established as a viable, decentralised alternative to fiat?The supply of Bitcoin is limited, say its advocates, but new cryptocurrencies are springing up everywhere. Cryptocurrencies are crypto assets, not currencies, plus they are awkward to use and not safe (as some vaults have been hacked into), says Marshall Glitter. Questioning digital currenciesIn my view, this development raises an existential problem for cryptocurrencies such as bitcoin: what will be the raison d’etre for cryptocurrencies once CBDCs become ubiquitous? Why would someone prefer to let Facebook’s Mark Zuckerberg look after their money rather than Fed Chair Jerome Powell or
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Do the central banks have a digital master plan in place that will see them derail bitcoin and other cryptocurrencies before they have truly been established as a viable, decentralised alternative to fiat?The supply of Bitcoin is limited, say its advocates, but new cryptocurrencies are springing up everywhere. Cryptocurrencies are crypto assets, not currencies, plus they are awkward to use and not safe (as some vaults have been hacked into), says Marshall Glitter. Questioning digital currenciesIn my view, this development raises an existential problem for cryptocurrencies such as bitcoin: what will be the raison d’etre for cryptocurrencies once CBDCs become ubiquitous? Why would someone prefer to let Facebook’s Mark Zuckerberg look after their money rather than Fed Chair Jerome Powell or
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Mike Norman considers the following as important:
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Do the central banks have a digital master plan in place that will see them derail bitcoin and other cryptocurrencies before they have truly been established as a viable, decentralised alternative to fiat?
The supply of Bitcoin is limited, say its advocates, but new cryptocurrencies are springing up everywhere.
Cryptocurrencies are crypto assets, not currencies, plus they are awkward to use and not safe (as some vaults have been hacked into), says Marshall Glitter.
Questioning digital currencies
In my view, this development raises an existential problem for cryptocurrencies such as bitcoin: what will be the raison d’etre for cryptocurrencies once CBDCs become ubiquitous? Why would someone prefer to let Facebook’s Mark Zuckerberg look after their money rather than Fed Chair Jerome Powell or ECB President Christine Lagarde? And who would prefer to hold their money in an unsecured exchange like Mt. Gox, an entity that was hacked in 2014 while losing $460m in the process? Other crypto exchanges have collapsed due to outright fraud – Turkey’s Thodex exchange was taken offline after its founder absconded with $2bn in bitcoin-denominated client funds.
Indeed, why do bitcoin or other cryptocurrencies have any value to begin with? The key to that is their generic name: cryptocurrencies. Bitcoin and others have been promoted as a superior upgrade to managing a financial system, as opposed to ‘fiat’ US dollars and euros that are susceptible to debasing and devaluation by reckless monetary authorities. Early adopters and buyers are expecting greater demand in the future, but why exactly should demand increase?
One assumes it is because they expect people to use them for two of the three uses of currencies: a medium of exchange and a store of value.
The adoption of CBDCs is likely to dispel the illusion that cryptocurrencies are ‘currencies’ in the true meaning of the term and scuttle their aspired goal of becoming cash equivalents (see Fig 1). As many policymakers have pointed out, including former Bank of England Governor Mark Carney and Swiss National Bank President Thomas Jordan, cryptocurrencies are crypto-assets, not currencies. People are buying them simply in the hope of selling them at a higher price in the future. But if CBDCs occupy the niche in the financial sector that cryptocurrencies are expected to occupy, why should demand increase?
World Finance