If Blockchain technology is deployed rapidly and effectively, we can bank the unbanked, automate contracts and even get Blockchains to work with the Internet of Things (IOT) to create a Blockchain of Things. Yet the primary use of Blockchains remains as a medium to validate cryptocurrency transactions.
If that is the case, one must ask the question, how soon before central banks not only accept Blockchain but also start to have more acceptance of Bitcoin and other cryptocurrencies? After all it is the central banks who run most of the world’s currencies and they are the ones who stand to gain the most from this emerging technology.
Central banks are toying with crypto
It is no secret that central banks have been embracing Blockchain for a while. The Dutch central bank DNB has even run an extensive experiment on a cryptocurrency of its own. We also know that the Reserve Bank of India is toying with Blockchain and so is the Bank of England. Now however, central banks are going one step further and are thinking of printing their own Bitcoin.
The Wall Street Journal recently reported on this development:
“A central-bank-issued Bitcoin would be a means for policy makers to completely control the amount of money in the economy, much like full-reserve banking.”
Banks stand to lose if central banks adopt digital money
Imagine you could own money which is kept directly with the central bank. Or indeed you store money in a central bank coin wallet on your phone but the money is guaranteed by the central bank. Why would you use a retail bank anymore?
At the moment paper money is usually held in savings or checking accounts for safekeeping and also because of the convenience factor, but it also comes with a risk.
Private banks can fail and indeed there are many cases in which they have done so. Should there ever be a scenario in which central banks issue digital currency, the goose of the private banks would be truly cooked.
Blockchain maybe left out of the equation
While on the face of it there is every possibility that we are heading for a future in which central banks will embrace Bitcoin and Blockchain, it may never happen. There are chances that Blockchain can be one of those technologies that almost made it to the mainstream but never quite did.
As Simon Dixon, CEO BnkToTheFuture.com says:
“I don’t think central banks will use Crypto Currencies and Blockchains but I am certain that they will use a digital currency for three reasons. Firstly, they prefer to track all digital currency transactions as a replacement for fully anonymous cash. Secondly, if there is a black swan crisis again in banking they can replace all bank deposits with a central bank digital currency. Finally, they can become a technology provider that allows FinTech companies to build on top of a central bank digital currency through a central bank API to increase competition in banking.”
Life in a paperless world
However, there is another side to the story as well, a story which has a happy ending. Central banks could put Blockchain and Bitcoin to extensive use. So much so that there maybe is a future in which you see no paper currency whatsoever. Will paper currency be just a relic?
Kumar Gaurav, CEO Cashaa.com thinks it can be possible:
“For example the method of transferring value in ancient times has ranged from salt to gold, just to mention some of the most famous, and then people started to use coins and paper. I personally have no doubt that this evolution will continue and cryptocurrencies are in an optimal position to be the next big step.”
Adoption by mainstream or Not, Crypto is a winner
Look at it from any side, the world of money as we know it is about to have a drastic change. Blockchain and cryptocurrencies have already made their impact. Even if central banks completely ignore this technology both retail banks, as well as communities of people, are working on Blockchain. However the chances are that central banks will adopt rather than ignore.
Kumar Gaurav notes:
“Yes, I think that central banks will eventually make their move towards adopting cryptocurrencies based system. At what stage it will happen is difficult to say now, still the technology underlying the cryptocurrencies is nascent, not mature yet and it needs to consolidate. But it is part of the human being to use more efficient methods to transfer goods and values.”
As for Bitcoin enthusiasts, the news is good for them as well because Bitcoin presents an alternative that is already here and working, not to mention ready for the future.
Simon Dixon says to CoinTelegraph:
“This is good news for Bitcoin as central bank digital currencies can be traded against the only borderless global digital currency through an instant clearing API. This is very bad news for banks and very radical banking reform on the existing model where private banks are the issuers of digital currencies using loans as they are today.”