The unprecedented upheavals taking place in the world of cryptocurrencies seemed to have awakened the sleeping giants as many of the world’s major central banks are mulling the issuance of their own digital currencies.
A study by the Bank for International Settlements (BIS), says 86 per cent of central banks globally are researching Central Bank Digital Currencies (CBDC) while 60 pc are currently experimenting with it and 14 pc of are in the pilot testing phase with CBDC. Here in India, where crypto enthusiasts have been crying hoarse about the government being on the fence when it comes to crypto were surprised when a bombshell of sorts was dropped last week, thanks to an announcement from the RBI.
If all goes well, the apex bank will be latching on the CBDC bandwagon in the near future. T RabiSankar, Deputy Governor, RBI had said the RBI plans on introducing a digital monetary asset in a phased manner soon. Sankar did not ignore the elephant in the room when he added the CBDC was being incepted ‘in lieu’ of private digital assets such as cryptocurrency. And the big USP is the CBDC will be a legal, legitimate type of virtual coin that will be treated on par with its real-world counter part.As opposed to private digital currencies like Bitcoin and Ethereum that have no legal issuers and hence cannot be considered currency or money, the CBDC can be treated as an instrument to exchange monetary value.
This virtual coin is being conceived to coexist with digital payments as well as cash, and legal framework to incorporate the same is now being framed. Changes to our Foreign Exchange Management Act as well as the IT Act, apart from the RBI Act and the Coinage Act 2011 will be necessary to make digital currencies a reality, Sankar said. These recent developments could well be the beginning of sweeping changes in the way the mass market and population perceive the notion of digital currencies. In a commentary, Yanis Varoufakis, the former Greek Finance Minister, spoke in favour of CBDCs saying “one hand, Bitcoin-like, non-state cryptocurrencies threaten the bankers’ monopoly over the domestic and international payment system. But the drawback of the crypt-money supply is that it cannot be adjusted to reflect economic activity. ”Varoufakis has even highlighted how the notion of CBDCs is gaining support from the Bank for International Settlements (the central bank of central banks). In his words, if these financial gatekeepers fail to embrace CBDCs, an entity like the People’s Bank of China could take the lead, considering its own digital currency is at an advanced stage of development.
Chain Split Term used to describe cryptocurrency forks the separation of a single original coin into many independently managed projects
“Who controls transactions, interest rates, and money creation controls politics. That’s why the powers-that-be will fight this proposal tooth and nail,” he added. According to Sankar, globally, central banks are looking at CBDCs as an alternative to volatile crypto assets. It’s an alternative that can be on boarded into the mainstream economy, as it is not subject to the volatility of the market’s fluctuations.
Investing in crypto is like investing in Facebook in its early days: Saylor
MicroStrategy CEO MichaelSaylor has gone on record likening buying the crypto currency to that of investing in Facebook in the social networking giant’s start-up days. “If you borrow billions of dollars at 1% interest and invest it in the next Big Tech digital network that you thought was going to be the dominant Amazon or Google or Facebook of money, why wouldn’t you?” Saylor has said in a TV interview. “I mean, if I could borrow $1 billion and buy Facebook a decade ago for 1% interest, I think I would’ve done quite well.” “We’ve got $2.2 billion of debt and we pay about 1.5% interest, and we have a very long time horizon,” Saylor said. “Our point of view of being a leveraged, Bitcoin-long company is a good thing for our shareholders.”
