Decentralized digital currencies in the hands of central banks – A new world order
The Nederlandsche Bank’s annual report published in March 16 had a short remark about intentions of developing its own digital currency based on distributed ledger technology in 2016. Tony Richards, Head of Payments Policy Department at The Reserve Bank of Australia, said in a conference that he expected an eventual digital version of the Australian […]
The Nederlandsche Bank’s annual report published in March 16 had a short remark about intentions of developing its own digital currency based on distributed ledger technology in 2016.
Tony Richards, Head of Payments Policy Department at The Reserve Bank of Australia, said in a conference that he expected an eventual digital version of the Australian dollar, issued by the central bank “with distribution and transaction verification by authorized entities, which might or might not include existing financial institutions”, accepting a world where “the digital currency would presumably circulate in parallel, and at par, with banknotes and other existing forms of the national currency.”
In his opinion, well-established, low-inflation national currencies are not threatened by privately-established virtual currencies in respect to individual economies, but cyber security and cryptography risks will delay full-scale issuance in any country.
The PBoC has also made public statements regarding digital currencies, having revealed in a seminar held in January of intentions of launching their own, cooperating with the financial and technology sectors to develop research. “We think, as a legal tender, digital currency must be issued by the central bank. The issuance, circulation and transaction of digital currency will follow the same management principles of traditional currency”, said PBoC Governor Zhou Xiaochuan in the conference, also stating that “a balance needs to be struck between protecting privacy and cracking down on illegal activities”.
“At the current stage, the central bank’s major goal of issuing digital currency is to replace the physical cash so as to lower the costs of issuing and circulating traditional paper money and to improve the convenience”, concluded Mr. Xiaochuan.
This month, FinanceFeeds reported the arrival of a new digital currency, RSCoin. Developed by the University College of London (UCL), it is different in the way that its purpose is to be adopted by central banks, “while still maintaining the transparency guarantees that have made fully decentralised cryptocurrencies so attractive.”
RSCoin would allow central banks to have precise control over the money tap and track counterparty liabilities automatically, enabling a quick regulatory action. Such technology, whether RSCoin or other distributed ledger, might also centralize control of money creation, disempowering banks.
The underlying architecture of distributed ledger technology, blockchain-alike, has potentials not only for the future of money, but also for the future of networked cooperation. Decentralized topologies and non-discriminatory protocols are being replaced by recentralized infrastructure by global corporations and now central banks, which means that whoever controls the data center has disproportional power over communications, politically and economically.