Facebook’s new Libra cryptocurrency is stirring mixed reactions from banks everywhere, but some of these reactions are inspiring them to do things one would never believe they’d do.
Libra Is Turning Financial Heads
At press time, it appears Libra has caused many banks around the world to examine the prospects of releasing their own cryptocurrencies. Maybe it’s because they’re afraid of the power Facebook will have and they want to have some sort of leverage granted Libra turns out to be the “next big thing” in finance. Maybe they want to build their own networks and power up in case they must compete directly with Facebook, or maybe… Just maybe, they suddenly like cryptocurrency and think it can do wonderful things for the world.
Either way, many banks are looking into developing their own forms of crypto, and like everything else, this could have both positive and negative attributes. For one thing, cryptocurrency is designed to be decentralized, while banks are not. If banks are now controlling crypto, the benefits of those digital assets will not be the same as those of bitcoin, Ethereum, Litecoin or other mainstream forms of crypto.
These are examples of decentralized assets, and they give more financial independence to their users. If banks are controlling the crypto assets in question, this will go against everything that crypto stands for, and people will still be subjected to the same rules and regulations one often sees with banks, which means there will be limits on who can use them and for what.
At the same time, all these currencies would likely be stable currencies and tied to the forms of fiat represented by the banks issuing them, meaning they’ll be less vulnerable to price swings and volatility. This could ultimately represent a whole new wave of monetary means (digital cash) for users to enjoy without having to worry about inflation.
One of the banks that was originally against creating its own form of crypto was BIS. It’s chief Agustin Carstens claimed he “didn’t see the value,” but has since changed his mind and submitted a report that explains how the bank is looking to work with and gain knowledge from financial institutions that are creating their own crypto assets.
Why the Change of Heart?
Carstens explains:
Many central banks are working on it. We are working on it and supporting them, and it might be that it is sooner than we think that there is a market and we need to be able to provide central bank digital currencies.
BIS also says it’s looking to build an “innovation hub” for financial technology. The space will be explored by organizations stationed in Singapore, Switzerland and Hong Kong. In addition, Sweden’s central bank is also looking to build its own cryptocurrency – a move that Carstens allegedly supports all the way.