Central banks are being left behind by the breakneck speed of private currencies

Central banks see crypto and private payments as anathema to their vision of a world that they totally control through their own programmable digital currencies. The threat is, that before they can lumber into action and release their CBDCs, the crypto industry will already be firmly established, and the monetary system will be fractured.

The head of the Bank of International Settlements, Agustin Carstens, claimed in a recent speech to the Goethe University’s Institute for Law and Finance, that “trust” in the currency was what “held the monetary system together”.

He talked of central banks being at the core of a system that “do not aim for profits, but to serve society.” He added:

“CBDCs do not need to borrow their credibility. As they are directly issued by the central bank, they inherit the trust that the public already places in their currency. They can thus serve as a sound foundation for future innovation.”

It all sounds rather pleasant and comforting. Central banks have our backs and all we have to do is just trust that what they are doing will eventually be for our good. 

The issue here is in what parallel universe have the banks done anything to further the interests of the common investor? The fiat monetary system is failing all but those nearest to the hand-outs. Banks are receiving ever more currency printed out of thin air in order to keep them afloat, while the average Joe is having their purchasing power wiped out by central bank induced inflation. How is this a system based on “trust”?

Fortunately, according to an article on Bloomberg this morning, while money is pouring into digital assets in the crypto sector, central banks around the world are moving at a snail’s pace, and it was thought that “a digital dollar or digital euro remains years away.”

Also, it posits that major central banks in the West, such as the US and the UK, are thinking more along the lines of regulation to curb and de-risk the perceived threat that cryptocurrencies and fintech might bring.

All the while, the crypto sector is growing at speed, and yields that can be found fairly easily on many of the DeFi platforms are infinitely better than those offered by traditional finance.

The age old adage that money will go where it is treated best is possibly the best way to look at it. On the one side we have capital pouring into the most fantastic innovations on payments and yield bearing products in the crypto space, and on the other we have states issuing their own digital currencies for quicker and cheaper payments.

The crypto innovations threaten a fracturing of the monetary system into several payment systems, while CBDCs will be able to be used to levy complete control over populations.

It could be seen as a case of the lesser evil, or it could be seen as a fight for the future of money between state controlled entities and the innovation-driven private sector. Whatever happens, we are at the most important pivotal point in the entire history of money. A winner should be decided in the next few years.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.