What central banks say about cryptocurrencies
Perhaps eight years is too long to be cautious. Central banks around the world have either been too cautious about Bitcoin, or waiting to see the potential of Bitcoin and cryptocurrencies, with some not aware of it at all.
But a quick check reveals most are now either working towards Bitcoin adoption paths or studying Bitcoin. Some central banks such as Netherlands have issued their digital versions of cryptocurrencies while Sweden is working on its own digital register-based e-krona.
Many now recognize the potential of it as well as possible downsides of digital currencies. For instance, some say cryptocurrencies can enhance efficiencies in the face of fiat money. Others say it can help improve security and others see it as a threat for security reasons.
Cryptocurrencies are not new within U.S. circles, whether you talk about banks or security. The Federal Reserve thinks there are technical issues with the technology according to European Central Bank who cited governance and risk management. He said there are meaningful challenges to issuing a central bank cryptocurrency as an answer to Bitcoin due to privacy issues that could be a problem. The private sector alternatives can do the job.
European Central Bank has been cautious about digital currencies. Vice President Vitor Constancio called Bitcoin an equivalent of the 17th-century bubble in the Netherlands. His colleague Benoit Coeure says Bitcoin is characterized by unstable value and links to tax evasion and other risks and crime. President Mario Draghi said this month that crypto posed no threats to central bank's monopoly on money and their impacts on euro-area economy is limited.
China is well known in the crypto scenes for banning ICOs recently in September. The move was viewed by some as China's intentions to launch its own digital currency.
People’s Bank of China thinks that the conditions are ripe for it to embrace this technology. Authorities say digital currencies could help improve efficiency in the payment and allow more accurate control of currencies.
Most daring with implementing digital currencies are the Dutch. The central bank already has its own cryptocurrency called DNBcoin for internal circulation only.
Ron Berndsein, who is in charge of the project, said the blockchain can be "naturally applicable" in settling financial transactions.
Singapore has already experimented with cryptocurrencies where it issues its digital tokens (digital version of the Singapore Dollar (SGD) on the Ethereum blockchain in the Project Ubin.
Bank of Japan does not plan to issue digital currencies but it was important to gain deeper knowledge about them.
Governor Haruhiko Kuroda said issuing of a central bank digital currency was similar to extending access to its accounts to anyone.
Bundesbank, whose board member Carl-Ludwig Thiele said in September said that blockchain would disrupt banks' business models if there was a shift of deposits, is studying the application of the technology in payment systems.
Thiele said in September that Bitcoin is more of a speculative thing than a form of payment.
Bank of England Governor Mark Carney said cryptocurrencies have potential to bring revolution in finance. He says the the distributed accounting database could help the bank strengthen their defense against cyber attacks and overhaul making of payments between institutions and consumers.
He said the bank is not planning to create a digital version of sterling.
The Bank of France’s Governor, Francois Villeroy de Galhau, said in June that the lack of a public institution to provide confidence in Bitcoin dealings means Bitcoin should be approached with caution, citing data attacks.
India’s central bank opposes cryptocurrencies on the basis that they can be used for money laundering and terrorist financing. Currently, the use of cryptocurrencies in the country is a violation of foreign-exchange rules.
But the Reserve Bank of India is studying whether the currencies backed by global central banks can be used as legal tender.
The Banco Central do Brasil pledged this month to support financial innovation including systems that make financial systems safer and more efficient. It does not see any immediate risks of cryptos to the financial systems although it said it was alert on usage of cryptocurrencies.
The Bank of Canada is doing a research on cryptocurrencies. The senior deputy governor, Carolyn Wilkins, said this month that cryptocurrencies are not true forms of money but should be treated as an asset or security.
She thinks distributed ledger technology has potential for making financial system more efficient.
Bank of Korea Deputy Governor Shin Ho-soon said this month that more research on and monitoring of usage of cryptocurrencies was needful. The bank has been protecting customers and preventing cryptocurrencies usage as a tool of crime.
Governor of Russia’s central bank said they do not legalize pyramid schemes and opposed to usage of private money whether physical or virtual. He expressed concerns over potential risks from digital currencies.
Bank of Russia has delayed regulating of financial instruments until President Vladimir Putin pushes for action sooner.
The Reserve Bank of Australia is monitoring rise of digital currencies. They recognize Bitcoin underlying technology as with potential for widespread use in financial sector and many other parts of the economy.
This was according to head of payments policy Tony Richards said last month.
Turkish Central Bank Governor Murat Cetinkaya said in Istanbul earlier this month that cryptocurrencies can contribute to financial stability if well designed.
He said cryptocurrencies pose a risk to central banks with regard to controlling money supply and price stability, and transmission of monetary policy.
The technologies, he said, could be an important element for a cashless economy and can help speed up and make payment systems more efficient.
Sweden’s Riksbank, world's oldest central bank is exploring options including having a digital register-based e-krona. e-krona could have balances in central-database accounts or with values stored in an app or on a card.
According to the bank, e-krona poses would pose "no major obstacles" to monetary policy.
Norway’s Norges Bank said in a May report that it was looking at possibilities of individual accounts at the central bank or plastic cards or an app to use for payments.
In Denmark, Deputy Governor Per Callesen cautioned against offering of digital currencies directly to customers by central banks. He said direct access could contribute to runs on commercial banks in times of crisis.
The Reserve Bank of New Zealand said this month it was considering issuing currency in future and that digital units could fit into those plans.
The bank said work is underway to assess future demand of New Zealand fiat and consider whether it is feasible to replace fiat with digital alternative.
Morocco prohibits use of virtual currencies in all transactions because it violates exchange regulations. It is punishable in law. For them, cryptocurrencies are a hidden payment system not backed by any institution and with significant risks for users.
Bank for International Settlements
According to the central bank of central banks, it is impossible for the central bank for central banks to ignore growth of cryptocurrencies and is likely to consider whether to issue their own at some point.