Reserve banks in Canada, Singapore and the UK are considering the possibility of issuing their own cryptocurrencies to solve problems with international money transfers.
The reports of these banks indicate that if they issue their own cryptocurrencies, they will have a number of advantages, such as round-the-clock availability and anonymity, and all the risks associated with various intermediaries will disappear.
Similar reports were issued by commercial banks, such as the United States Overseas Bank, HSBC, Toronto-Dominion Bank and Oversea-Chinese Banking Corporation. They noted three models of banking cryptocurrencies, which differ depending on the geography of activity or the possibilities of their adoption by other systems.
The first model is tied to the fiat currency of a particular country and can only be used within a specific jurisdiction. This model assumes that the Central Bank of the country will provide the opportunity to register the corresponding crypto-wallets, the funds on which can be used to carry out operations in any other commercial bank in the country.
The second model is similar to the first, but differs in that it can be used to carry out operations in other jurisdictions. It suggests that Central Banks will support several different tokens linked to different fiat currencies. Commercial banks that are accountable to one of these Central Banks will also need to support the desired tokens.
The third model assumes that the cryptocurrency will be supported not by one, but by several fiat currencies, and it can be exchanged for any of them. However, one of the reports highlights the serious shortcomings of this model:
“Since such a cryptocurrency will be tied to several fiat ones, it will be very volatile, it will be easy to manipulate, and also it will be more accessible for investment. Our analysis also showed that this model will not be widely implemented, since it will be very problematic to tie additional fiat currencies to such cryptocurrency. ”
The advantages of this idea
The report concludes that the use of central bank cryptocurrencies to replace existing payment systems will help solve many problems, such as low availability, the difference in standards, and the need for multiple intermediaries for transfers.