Decentralised currency tempts central banks
Countries experiencing dramatic drops in cash use are becoming targets for centralised crypto-currency trials. Central banks like Riksbank are seeing the shift to digital payment as an opportunity to introduce centralised digital currency that utilises blockchain technology.
The hype continues to grow around Sweden's cashless dreams with the central bank publishing the report that 'developed a concept for an e-krona, which is presented' here.
Excerpt from 'The Riksbank e-Krona Project' September 2017 report
'Today, cash is used to an ever-decreasing extent in Sweden, which has led us within the world of central banking to start considering whether a digital complement to cash that is guaranteed by the state is needed so that we will be able to promote a safe and efficient payment system in the future too. Consequently, in mid-March, we launched a project with the aim of investigating the need for a so-called e-krona and the possible consequences of introducing such a complement.'
According to the report, project e-Krona is a digital currency that may utilise Distributed Ledger Technology (DLT) when it 'is considered appropriate'. While a recent article from MIT Technology Review discusses the irony in a central bank managing a payment network that was fundamentally designed to decentralise payment and make banks unnecessary, it is up to consumers to question what central bank cryptocurrency would mean for them.
'First, there’s the question of who, exactly, should verify the transactions and maintain the distributed ledger. Even if that’s solved, the new system would be, in a sense, too streamlined, making it easier for bank runs to occur in a moment of crisis or panic. In most current financial systems, large-scale withdrawals of funds are naturally slowed by the time it takes for a central bank to produce the paper money people are demanding. But if the currency is purely digital, no such brakes exist—a panicked citizenry could empty their accounts almost instantly, leaving an entire country’s banking system all but penniless...' (continue reading).
'Central-bank-backed cryptocurrencies would be ironic indeed, given that Bitcoin was created as a way to circumvent the need for banks.'
'Even if this application were ready for prime time, it wouldn’t solve the issue that Sweden is facing. One obvious drawback to the country’s dwindling cash usage is that an increasing reliance on mobile payment systems risks marginalizing people who don’t use them or can’t access them. Those systems are also run by private companies, which means...' (continue reading).
Why would the public give up cash as a payment option in order to exclusively use e-currency attached to a technology that relies entirely on a network of computers? In an age where phone and data hacking is growing exponentially, why should consumers lose their only hacker-proof way of saving?
Mike Orcutt, September 25, 2017. 'Governments Are Testing Their Own Cryptocurrencies' MIT Technology Review.
Mike Orcutt is 'an associate editor at MIT Technology Review and is from Washington, D.C., where he's on constant lookout for stories that illustrate how the U.S. government is embracing (or failing to embrace) emerging technologies...'
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