With the popularity of the digital currency industry, the movement is becoming increasingly difficult for countries to ignore. In today’s landscape, various central banks are participating in the digital currency conversation in their own way. While several countries remain adamantly against the existence of digital currencies, others look to investigate its underlying technology. Some have even announced plans to launch digital currencies of their own.
A few central banks continue to investigate launching their own state-backed digital currencies. One example is Estonia, which announced plans to launch the ‘Estcoin’ in late 2017. However, Estonia’s plans were met with objections from the European Central Bank, which stated that the proposal was in violation of eurozone regulations. At the time, European Central Bank president Mario Draghi stated that EU member nations could not introduce their own currencies.
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Russia unveiled similar plans to launch the ‘CryptoRuble’ around the same time in 2017, since the country is not obligated to follow eurozone regulations. With Russia’s proposal, Minister of Communications and Mass Media Nikolay Nikiforov stated that the country was in a race to launch the currency ahead of its neighbours in the Eurasian Economic Community.Currently, a diverse set of countries is purportedly looking into the creation of central bank digital currencies (CBDCs) including, but not limited to: Israel, India, and Sweden.However, the Bank for International Settlements (BIS) recently warned countries against launching their own CBDCs, stating that the implications and risks are not yet fully understood. “Central banks and other authorities should continue their broad monitoring of digital innovations, keep reviewing how their own operations could be affected and continue to engage with each other closely,” it stated.Further, some view the idea of government-controlled digital currencies as oppositional to the digital currency movement. Historically, digital currencies aim to disrupt current institutions and shift the balance of power in favour of the people through decentralized governance, so the idea of a government running their own might seem problematic to some in the community.
While some countries look to issue their own digital currencies, others condemn the industry altogether. Interestingly, some countries like India and Russia both warned against digital currencies and announced plans to launch digital currencies of their own. Recently, Poland’s central bank was met with criticism following reports that the country funded YouTubers in its campaign to deter investors from engaging with digital currencies. As part of its ‘#uważajnakryptowaluty’ (‘#Watch out for cryptocurrencies’) campaign, Poland’s Central Bank reportedly spent 91,000 Polish Zloty (around $34,000 CAD) on a marketing campaign aiming to challenge the positive views of digital currency consumers. Similarly, many central banks across the globe have made less-than-supportive statements directed towards digital currencies. In January 2018, Reuters reported that Indonesia’s central bank (BI) said that digital currencies were not a recognized medium of exchange. A BI spokesman further stated that “ownership of virtual currencies is high risk and prone to speculation because there is no authority who takes responsibility.” Similarly, the Central Bank of Nigeria (CBN) warned against digital currency investments in March 2018. In doing so, the country stated that the country’s exchanges were not licensed or regulated, following earlier statements telling the public not to interact with digital currencies.
One area where the financial authorities of many countries are willing to acknowledge the significance of digital currencies is with the industry’s underlying technology; blockchain. Currently, central banks across the world are investigating ways in which blockchain and its adjacent technologies could be used to better their services and create added value for consumers. In March 2018, Lithuania’s central bank invited contributors to help foster the development of LBChain, the country’s proposed service which aims to help international companies carry out blockchain research and implementation. Currently, LBChain is set to launch in 2019. In Singapore, the Monetary Authority of Singapore (MAS) said that distributed ledger technology could be valuable in situations where it is important to identify ownership and/or it is impractical to rely on a central party. The island nation is currently investigating how blockchain could be used to facilitate international payments with greater speed and lower cost. In order to foster innovation, Singapore’s central bank partnered with the Bank of Canada to test borderless transactions.
Further, the Bank of Canada previously published a paper examining the idea of launching its own central bank digital currency. If nothing else, this seemed to suggest that Bank of Canada staffers are exploring the merits of services built with blockchain technology.Ultimately, the international community is divided in its treatment of digital currencies. However, countries are joined in their inability to ignore how prevalent the digital currency industry has become. These developments have the potential to shape more than just the digital currency industry, as regulation and adoption could impact the global economy.Image credit: picserver.org
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