Despite governments’ interest in decentralized ledger technology (DLT), the traditional financial system still does not trust cryptocurrencies.
During his speech before the UK Parliament on 4 March, Andrew Bailey, the upcoming governor of the Bank of England, said:
“If you want to buy Bitcoin, be prepared to lose all your money… [Bitcoin] has no intrinsic value.”
Nevertheless, the great efforts that appear to be appropriate for technology such as the launch of the “Venezuelan Petro” and central bank digital currency (CBDC) talks show that the technology is still either deeply misunderstood or considered a threat to the status quo.
Although various types of structures were discovered for CBDC, there is always a certain level of centralization that conflicts with the basic values of Bitcoin and cryptocurrencies: decentralization and volatility.
Arwen Smidt, lead blockchain strategist at MintBit, said:
“CBDC’s could very well become potentially a tool for governments to assert control on crypto. It’s definitely part of the reason why these central banks are looking at it. So, that can go two ways: either the government would do it purely to assert control or to make cryptos fall in line with the future monetary policy and also grant legitimacy to these new forms of private money.”
17 governments exploring CBDCs
CBDCs have recently become one of the topics occupying the minds of those interested in the crypto space. The BIS Quarterly Review, published earlier this week, shows that at least 17 countries are exploring potential uses of the CBDCs.
Earlier this year, Christine Lagarde, president of the European Central Bank, has announced active participation in the development of CBDCs to meet the growing demand for faster cross-border payments.
However, the report clarified that cross-border payments are not a priority in any of the projects currently under way and the CBDC would not address the problem of inaccessibility to transitional accounts. These two major issues are often caused by emerging markets and developing economies, where cryptocurrencies have become a way to escape inflation and economic instability.
It seems that these efforts disregard the true value of blockchain technology as well as its decentralized and transparent nature. Centralized payment systems are famous for being faster than cryptocurrencies.
The BIS report reads:
“The overhead needed to operate a consensus mechanism is the main reason why DLTs have lower transaction throughput than conventional architectures. Specifically, these limits imply that current DLT could not be used for the direct CBDC except in very small jurisdictions, given the probable volume of data throughput.”
Earlier, Cryptolydian reported that representatives of some central banks presented their initiatives around the central bank digital currencies (CBDCs) in the one-day conference that was held in Kyiv, Ukraine last week.