Many banks are beginning to issue their own digital currencies. It can be implied that the likes of Libra may have caused these banks to look into establishing such assets, but according to a new report, bitcoin is the real reason many of these institutions have taken the next steps.
Bitcoin May Have Given Birth to Many Bank-Issued Digital Currencies
Libra is a scary currency for most banks in that it’s looking to establish itself as a global currency that virtually every country can gain access to and use via Facebook to purchase goods and services. That is a powerful asset indeed, should its ambitions ever become realized. Thus far, Libra still appears to be on the backburner. There’s been a lot of talk surrounding the currency, but it still hasn’t emerged despite being first announced over a year ago in June of 2019.
However, bitcoin is still on the rise and in power. The currency is arguably the world’s largest digital asset by market cap and is still the most widely used cryptocurrency in what appears to be a list of digital assets that grows by the day. On top of that, the currency has surged in price, though at press time, it is trading for just under $11,600, which means it has fallen by roughly $800 over the past week after initially striking $12,400.
However, many people are beginning to see bitcoin as a potential store of value: something that can hedge their wealth against inflation and other harsh economic conditions. Banks are worried about that, especially since many fiat currencies – i.e. the U.S. dollar – have been falling as of late and experiencing weakened statuses thanks to the COVID-19 pandemic.
Bitcoin is seen as a potential tool to offset the circumstances surrounding global fiat currencies, and it seems banks want to issue digital currencies as a means of competing with the likes of bitcoin, not Libra. Neha Narula – the director of the MIT Digital Currency Initiative – is quoted in a new repot as explaining:
We have the unique opportunity to design something that is like cash, for a digital context. Bitcoin kicked all of this off, which inspired the Bank of England to do some interesting writing on this. The idea of digital currency and e-money has been floating around for a while, but bitcoin accelerated that conversation. Now, we have an opportunity to decide what [digital cash] could look like, but there are a lot of different stakeholders with different views and wants. We don’t yet know how this will turn out.
The Experiments Go On
Thus far, China is the only major country to issue a bank-regulated digital currency. While other nations such as the United States have talked about it in the past, not much has come of these discussions. Narula continued by saying:
The crypto world is a laboratory to experiment with these ideas.