After a long period of monopoly, where central banks across the globe were in control of the most valuable resource – money, banks have found themselves being challenged by the upstart digital currency and in a position where they are not sure how to handle it.
The new kid on the block has caused confusion and forced people to take one side or the other – the Wall Street Banks holding Jamie Dimon’s views or other banks taking a more liberal view.
Banks have reached a time where they have to take a decision with regards to Bitcoin, however they have been very cautious in doing so as this is uncharted territory and an inappropiate decision can easily backfire. Apart from considering whether to take Bitcoin seriously or not, banks started looking into creating their own version of Bitcoin.
The US central bank have been reluctant about cryptocurrency as several issues have been raised, such as tax avoidance, privacy issues and the anonymity of transactions surrounding these digital coins.
Jerome Powell, a board member for the Federal Reserve, said:
“There are meaningful challenges to a central bank cryptocurrency, but it is the privacy issues that would be the problem, perhaps private-sector alternatives are the answer.”
Europe – Tulip Mania
After living through Tulip Mania in Netherlands, Europeans believe that this is just another bubble that’s about to burst. Vitor Constancio, VP of the European Central Bank, said at an ECB conference: “Bitcoin is a sort of tulip. It’s an instrument of speculation … but certainly not a currency and we don’t see it as a threat to central bank policy.”
China – adaptability
China’s central bank is currently working on a solution where they would be able to launch their own cryptocurrency, that would be regulated by the central bank to try and keep the volume within their boundaries.
Yao Qian, research lead at the People’s Bank of China (PBOC), said:
“The development of digital economy needs central bank-issued electronic currency more than ever. It’s crucial to speed up the research and issuance.”
Due to the potential of digital currency to be used for money laundering and terrorist funding, the central banking authority in China have decided to stay well away from Bitcoin or even creating a cryptocurrency of their own. However, as it stands, citizens are allowed to use these new digital currencies.
Central Bank’s Executive Director Sudarshan Sen said:
“As regards non-fiat cryptocurrencies, I think we are not comfortable. Bitcoins for example. That’s a private cryptocurrency. Right now, we have a group of people who are looking at fiat cryptocurrencies. Something that is an alternative to the Indian rupee, so to speak. We are looking at that closely.”
United Kingdom – “Financial Revolution”
Within Europe, the UK has a very positive approach when it comes to digital currencies, regarding it as a “financial revolution”.