Tuesday, July 14, 2020

Cryptocurrency Will Never Substitute Central Bank’s Currency, Romanian Central Bank Official Says

A Romanian central bank official, Daniel Daianu, recently confessed the frustration and fear of most Central Banks in the world on cryptocurrency. He stated that cryptocurrency would never replace central bank.

Cryptocurrency and Central Bank

As reported by Business Review, Daniel noted that cryptocurrency is nothing more than a financial asset. However, he stated that cryptocurrencies ‘won’t be able to fulfill the basic roles of currency’. He further argued that “Cryptocurrencies will never be able to substitute the currency issued by a central bank.”

During his defense of the central bank, he went further to discuss and defend the role of the state in the financial system. Daniel stated that the state is the only last resort lender. Hence, the central bank will always have a role to play. Per his words “In markets, the state is the only possible last-resort lender. When the banking system was saved, it wasn’t crypto banks that were saved. Central banks intervened by issuing base currency, which was followed by non-conventional measures.”

Issuance Of Central Bank Digital Currency

Further, Daniel stresses the need for central banks to adopt central bank digital currency which he considers a tool for the financial institutions to gain relevance against the prominence of cryptocurrency.

As he suggested, a couple of central banks have been adopting CBDC recently. Sweden’s central Riskbank last year announced a pilot program for the e-Krona which would be rolled out this year. The central bank of Norway, Norges Bank, is also considering a CBDC as cash usage in the country declines.

Also, the adoption of CBDC has not only been accelerated by policymakers and central bankers but also by consumers. A Twitter poll by the Bank of England conducted late last year indicated this. The poll shows that three-quarters of the respondents indicated that if they were to be gifted money, they would prefer it to be in a digital currency form.

Also, crypto pessimists, Nouriel Roubini also agrees with Daniel. He stated in a tweet post in 2018 that “My take on Central Bank Digital Currencies (CBDC). In spite of crypto zealots gloating about them, CBDC is the opposite of crypto & will bury crypto for good! Why Central Bank Digital Currencies Will Destroy Cryptocurrencies by Nouriel Roubini @ProSyn prosyn.org/eqngYGt.”

Meanwhile, a crypto trader noted via a tweet post that “CBDC won’t have the backing/following that the Crypto community offers. For any great new invention, the masses decide the victor and Cryptocurrency liberates our ties to centralised control. It empowers us, and it’s truly a force to be reckoned with. One day you will realise
pic.twitter.com/xfyaybYW0w.”

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