In Philadelphia, they concluded that the creation of sovereign cryptocurrencies under the supervision of central banks poses a threat to the entire banking system.
At one time, adherents of new technologies insisted that private virtual currencies carry out a coup: they will replace money, traditional smart contracts will replace traditional contracts, and lending will exist on a peer-to-peer basis. The need for an intermediary in the person of the state or the banking sector will disappear. The collapse of bitcoin, the failures with the ICO of a number of other cryptocurrencies made me doubt this. An increasing number of potential investors are coming to understand that private cryptocurrencies are likely to remain a niche product that cannot replace the traditional financial system.
The threat, experts say, is hidden elsewhere. Recently, states have moved from denying blockchain and cryptocurrencies to accepting them. All major countries are engaged in the study of appropriate technologies. Governments and central banks want to forever close the topic of physical cash, as this format requires considerable efforts to manufacture, control, combat counterfeit, and also allows the existence of a shadow economy. If the cryptocurrency is issued by the Central Bank, then it should sufficiently effectively protect the tax system from going offshore and radically complicate the possibility of money laundering.
With current money, the Central Bank of a country is actually only an arbiter and regulator. In the case of creating a working centralized cryptocurrency, he becomes a full-fledged player in the system.
This has already happened in history. For example, the Bank of England, considered the oldest Central Bank of the world (founded in 1694), was a private organization and freely competed with other banks in the country, accepted deposits and credited commercial enterprises under general conditions. A similar regime existed in the First and Second US Banks, the forerunners of the Federal Reserve. In the 20th century, with the spread of the partial bank reserve system, central banks began to turn into lenders of last resort, whose task was to maintain financial and macroeconomic stability. Their functions were cut back to emissions and supervision.
Now, thanks to broadband Internet, the Central Bank does not need to create numerous offices throughout the territory for direct work with customers (in the meantime, traditional commercial banks are gradually abandoning them). The issuing regulator will have the opportunity to work with the consumer – both with a private person and with the organization – directly. The digital currency will be issued to the account of a citizen or organization in a reliable blockchain system protected from theft. The need for an intermediary through which financial flows are distributed will disappear. At the same time, nothing can stop the Central Bank from keeping depositor accounts on its own and charging interest.
According to researchers from the NBER and the Philadelphia Reserve Bank, if the Central Bank gets the opportunity to fiscally subsidize deposits, then competition in the banking market will drop sharply and regulators may become deposit monopolists. The consequences for commercial banks will be fatal.
There is another, very curious, side of this issue. The state, which will be able to carry out such a transition first, will receive a huge advantage due to expertise and a more efficient financial system. As suggested by Bloomberg, if such a monetary unit is introduced in China, then this could undermine the position of the dollar as a world reserve currency and completely change the entire financial architecture of the world.