Central Banks Can No Longer Ignore Digital Currencies. Those who follow the news from the financial market know that the cryptocurrencies have been going through an amazing period as the value of all digital currencies has been growing non-stop this past couple of months. Starting from the idea itself, digital currencies have become an important factor in the world of currency exchange. Initially, central banks all over the world refused to get involved in this kind of business perhaps considering that it was destined to fail.
However, the recent boom of cryptocurrencies has also forced central banks to re-think their digital currency policies. It took them some time, but central banks have finally realized that digital currencies are here to stay and that they have already taken up a very important share of the entire financial market. For many years, central banks have been ignoring digital currencies by just observing the ups and downs they had during that time.
The Waiting Game Is Over
Central banks all over the world were satisfied with a number of traditional currencies circulating every day and they did not pay much attention to what is happening in the world of cryptocurrencies. Because of that, many experts believe that central banks have missed their opportunity and that they are too far behind when it comes to this issue.
Bitcoin has progressed significantly in the last couple of years and the voices calling for it to become the official currency are getting louder and louder. When it became obvious that Bitcoin will be a big thing, central banks had to react and take on digital currency business. If they did, Bitcoin and other digital currencies respectively would not perhaps pose such a treat for the established financial system and the traditional currencies.
As it is familiar, central banks are a type of guardians of currencies and they decide the value of the currency. However, in the case of digital currencies that is not the case and there is no institution that would set the price. The prices in digital currency market are determined by the supply/demand principle of the market itself.
Central Banks Losing Ground
As a consequence of the increased popularity of Bitcoin in the world, central banks could lose a significant portion of control that they have over the currencies in their countries. Because of that, many have claimed that there is no way for central banks to prevent this from happening and that they should join this business instead. That would provide the stability that central banks need to provide for the currency market as well as with the opportunity to more actively participate in the digital currency market.
Some central banks have reacted to this by creating their own cryptocurrency and one of those banks is the central bank of the Netherlands but it is limited just to the internal use. Besides the Netherlands, Russia has also displayed big interest in the second biggest digital currency, Ethereum, and their central bank has announced that they have been working on their blockchain program that could bring digital currencies in Russia.
Looking from this perspective, there will be more central banks from many countries in the world to follow what Russia and the Netherlands are doing as the presence of digital currencies continues to grow in the global financial market.
Written by Ivan Potocki
Agreed, central banks sure to follow what Russia and the Netherlands are doing.