“Cryptocurrencies won’t replace the currency issued by central banks,” says an official of the Romanian National Bank, Daniel Daianu, as reported by news outlet Business Review.
In a conference on Tuesday, Daianu who was more pro digital currencies issued by central bank than decentralized currencies emphatically talked about the important roles of state-backed institutions such as the banks and other financial institutions, and how even though technologies have been instrumental to the functions of these institutions, they need not necessarily replace them. He said:
“We must be aware of the difference between institutions and the roles they have. It is important for these roles not to disappear. Of course, technologies ensure business models and they have always done so.”
In his opinion, the fintech industry has in no small way helped financial business processes, and that this is part of market segmentation; each component of the market compartmentalized to function in its capacity to aid the overall market objective. However, in the light of innovative technologies like the blockchain and cryptocurrencies, there is a need for distinction.
“Blockchain and cryptocurrencies are financial assets, not cryptocurrencies,” he said, suggesting that since these instruments cannot be seen as bank replacements. In his reasoning, “currency is always backed by a last-resort lender”, adding that in the market, “the state is the only possible last-resort lender”. This reechoes Aviya Arika’s (Chief of Blockchain and Head of Strategic Initiatives at Aviya Innovative Law) view, who once said: “No crypto, not even bitcoin, is still mature and monetarily logical enough to behave like a fiat currency. The fact that it is used by people as a means of payment still doesn’t mean it qualifies as a currency.”
Perhaps making reference to the last financial crisis, Daianu said: “When the banking system was saved, it wasn’t crypto banks that were saved. Central banks intervened by issuing base currency, which was followed by non-conventional measures.” In his understanding of the market, and the roles played by both institutions and technologies, he is convinced that the ultimate height would be for central banks to issue digital currencies as technological trends continue.
One thing though, he made a positive remark on decentralization, recognizing that “new technologies lead to disintermediation”, and credited the feature to decentralized network benefits.
Central bank digital currencies (CBDC) are trailed by mixed sentiments for most countries, with extremes like the Bank of Korea and Bank of Italy suggesting no urgent need for the emerging digital currency class, and others like the Bank of England indicating the possibility of a future central bank with cryptocurrencies.
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