✔️ Information reviewed and updated in November 2023 by Eduardo López
The arrival of cryptocurrencies to the global environment was a severe blow to reality for traditional banks who considered common money as masters and lords. Today, we can see that this is not the case as cryptocurrencies such as Bitcoin have gained great popularity.
This leads us to wonder if central banks will, at some point, be ready to enter the world of cryptocurrencies. Well, here we will try to unravel this mystery from a study carried out by the Bank of San Luis, one of the regional banks that make up the Federal Reserve of the United States.
As we already told you, it was the Federal Reserve Bank of San Luis, one of the regional banks of the Federal Reserve, in charge of this investigation. Its purpose was to determine how prepared banks were to embrace cryptocurrencies.
The researchers in charge thoroughly studied both the banking and market structure and policies to determine whether a central bank could have its own cryptocurrency. This led them to very interesting conclusions about how cryptocurrency could change the entire current game of money and its use.
Are central banks ready?
The bank's structure was the first thing that was noticed when determining how prepared central banks were to embrace a cryptocurrency. According to the study, banks have different currency classifications in which they distribute assets such as money and gold.
In addition, they use different parameters that allow them to evaluate each asset or concept in order to better determine in which category to place it. The finding, revealed that banks have neither parameters nor a category in which a cryptocurrency can fit.
In fact, It was found that virtual currencies are very difficult to analyze under the conventional method, since they do not fit into it or behave in the way that we all know.This makes it very difficult to classify a cryptocurrency in a Central Bank as it forces the creation of a totally new model for its study.
Features that complicate its use for Central Banks
According to the study, there are 3 characteristics of cryptocurrencies that put banks in check:
- Property: It is enough to have a gold ingot or some banknotes in your hands to verify that you are the owner of said asset. With cryptocurrencies, there is nothing physical to support possession of the currency.
- Support: Traditional money is supported by another lower depreciating asset such as gold, on the other hand, cryptocurrencies do not have that type of support, which creates a conflict when setting their value.
- Liquidity: Finally, cryptocurrencies do not operate in the same way as conventional money therefore, if liquidity is required, they cannot be printed any more nor can they be taken out of circulation.
How do central banks classify cryptocurrencies?
Actually, there is no way to classify them, since these They have a different nature to fiduciary money, to credit titles, to debt, to gold and also to silver. That is why cryptocurrencies are so unique that they require their own classification.
Their characteristics, the way they operate, the use of Blockchain technology to sustain operations and even their volatility make cryptocurrencies a separate object. Central banks have tried to create models that allow their study, but its very nature makes it difficult.
Central banks and cryptocurrencies?
It has become apparent that the central banks of various countries have set their sights on the world of cryptocurrencies. A perfect example is Cryberyuan, the virtual currency created by the Central Bank of China which is about to hit the market. This shows the interest that countries around the world of cryptocurrencies have for their potential market value, and also its strategic role. Like China, other countries are considering including cryptocurrencies in their monetary strategy.
According to researchers, the fact that a Central Bank wants to venture into this area is certainly a bad idea. This for two reasons, the first is that A Central Bank, by nature, exercises control and centralization of assets while virtual currencies operate in a decentralized way.
The reputation of central banks and their control over monetary and financial policies works against them. On the other hand, The cost of developing a cryptocurrency can be very high considering the large amount of technology and hardware resources that are required to have a virtual currency up and running.
What is coming for the future?
One thing is clear virtual currencies have been a market response to new needs and lifestyle. In addition, they are a clear indication that the markets are beginning to tire of the control exercised by large banking institutions and central banks. That is why it is almost a given that cryptocurrencies will continue to grow, both in use and in value and popularity. There will be more and more Bitcoin users, as well as more cryptocurrencies available for people to start migrating from traditional money to the so-called money of the future.
At the same time, This inertia will lead central banks to take action on the matter, first, conducting in-depth studies on cryptocurrencies to generate enough information. Afterward, we are likely to see its foray into cryptocurrencies, either by launching its own token or generating control and regulations.
For the moment, The first step has already been taken for Central Banks to start looking at cryptocurrencies as an investment opportunity with the Cyberyuan. So it is likely that, in the following years, or even months, we will see much more news like that, especially if we consider that now companies are also going for their cryptocurrencies.