The centralization of crypto is always a contentious topic, however, the Bank of Canada reckons that a central bank cryptocurrency could be a winner in the long run. The Bank of Canada believes that Canadians and American could greatly benefit from cryptocurrency in regards to the increase of economic gains.
A central bank cryptocurrency is always suspect in the eyes of the hardened crypto-fanatic, but as the major financial institutes clamor to get a foothold in the industry, the latest reports from the Bank of Canada contend the need for a central crypto.
Introducing a central bank cryptocurrency
Canada, along with the US and Britain should be at the forefront of the crypto explosion, and in a new working paper that was published on Thursday, the Bank of Canada is leading the campaign for a central bank cryptocurrency.
Mohammad R. Davoodalhosseini from the Bank of Canada said in the report that central bank digital currency (CBDC) “can lead to an increase of up to 0.64 percent in consumption for Canada and up to 1.6 percent for the US, compared with their respective economies if only cash is used.”
Davoodalhosseini went on to explain that at this moment in time, too many central banks are mulling over their options in regards to crypto and are still deciding whether launching their own CBDC is a good or bad idea. The main issue is how can both physical cash and digital cash co-exist and how can the banks maintain monetary policy. It’s funny how the banks are constantly looking to how they can control the crypto markets instead of working with it. This will give you an insight into how banks think.
Digital and physical cash co-existing together
The paper argues that the economic growth and future well-being of a nation such as Canada or the US could be safeguarded by the implementation of a central bank cryptocurrency. Substituting cash with a CBDC is not costly, and could improve the country’s economic welfare.
Davoodalhosseini went on to say in the report that “Having both cash and CBDC available to agents (consumers) sometimes results in lower welfare than in cases where only cash or only CBDC is available. This fact suggests that removing cash from circulation may be a welfare-enhancing policy if the motivation to introduce CBDC is to improve monetary policy effectiveness.”
The report also suggested that in order for central banks to become more flexible in this ever-changing financial world, introducing a CBDC could be the ultimate solution: “This is because the central bank can monitor agents’ portfolios of CBDC and can cross-subsidize between different types of agents, but these actions are not possible if agents use cash”.
The controversial topic of central bank cryptocurrency will rage on into the future with those who question a bank’s role in ‘decentralizing’ crypto very vocal about protecting the industry against such things. Where there is money to be made and economic control to be gained, you can bet your last dollar that central banks will find a way to penetrate massive parts of the market in the future.
I am very experienced writer/blogger who has been an active member of the cryptocurrency community for several years. I have experience writing for crypto news sites and proactively been involved in the startup of other ICO and crypto ventures over the course of the past four years.