For the longest time, central banks ignored Bitcoin and cryptocurrency. Then, most of these institutions issued warnings advising individuals not to invest in Bitcoin. Over the years, these messages lost most of their clout and are now largely ignored by both cryptocurrency enthusiasts and the general public. In fact, the Bank for International Settlements, the world’s biggest central bank, confirmed that ignoring the Bitcoin boom is the wrong approach altogether.
Bank for International Settlements is not Bitcoin-averse
It is significant when any financial institution comes out in support of Bitcoin. There is an obvious reason why these banks oppose cryptocurrency, considering they cannot control this new form of money whatsoever. It is widely believed the ban on Chinese Bitcoin exchanges was a direct result of the frustration stemming forth from a government not entitled to a share of the profits generated by this new type of money they cannot control.
Central banks in other countries have taken a more cautious approach, for the time being. In most cases, they simply issue warnings about how cryptocurrencies are not regulated in that specific country and how investing in Bitcoin carries its own set of risks. All of these comments are more than valid, but they also apply to any other form of investment as far as the risk factor is concerned. Bitcoin has the potential to provide a lot of gains or losses, potentially more so than any traditional investment option.
Having the support of the Switzerland-based Bank for International Settlements is a major development for Bitcoin. The world’s largest central bank has stated that no one should ignore the Bitcoin boom. Up until now, this particular institution had been incredibly quiet on the Bitcoin front, as it never took any specific stance on the matter whatsoever. That in itself was rather unusual, considering Bitcoin has the power to put most – if not all – financial institutions out of business altogether.
The Bank for International Settlements is now advising central banks to issue digital currencies of their own. The concept of central bank digital currencies has been kicked around a few times, although no tangible efforts have become visible so far. Making this decision is rather time-sensitive in nations where the use of cash is dwindling at an accelerated pace. Sweden, for example, is one country where the use of cash is losing its appeal quickly.
These comments by the Bank for International Settlements comes at a peculiar time as well. JP Morgan Chase’s CEO recently stated that Bitcoin was a complete fraud, even though this was a clear attempt to manipulate the Bitcoin price. China is cracking down on the domestic trade of cryptocurrencies, mainly through the People’s Bank of China weighing in on this industry. When the largest central bank in the world somewhat opposes these ideas, things are sure to get pretty interesting for Bitcoin moving forward.
In the end, it remains to be seen if we will see viable central bank digital currencies in the future. For the time being, that seems highly unlikely, as there are no concrete efforts yet to be seen. That does not mean we will not see more central banks exploring the option of issuing their own digital currencies in the future. The statements made by the Bank for International Settlements are pretty intriguing, but it remains to be seen if other institutions are paying attention.