aNYONE WHO Bought Bitcoin a year ago seems supportive and rich. Five times higher than last year, on February 16, the value of cryptocurrency exceeded 50,000 for the first time. BlackRock, Bank of New York Mellon and Morgan Stanley are all set to catch up for some of Wall Street’s grandeur customers. Last week, electric-car maker Tesla said it had bought ઇન 1.5 billion worth of bitcoin and would accept it as payment for its cars.
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Investors’ interest in Bitcoin as an asset may increase, but due to the inconvenience and transaction costs associated with its use, it is possible that it may ever become a viable currency. The action here has been within the central banks. As consumers move away from using physical cash, and private companies such as Facebook show interest in launching their own tokens, many central banks have begun planning to issue their own digital currency. Last month, the Bank of International Reconciliation, the club of central banks, said it expects one-fifth of the world’s population to have access to central-bank digital currency.CBDC) By 2024.
China is clearly ahead. On February 17, it completed the third major test of its digital currency, giving 10m yuan (1.5 1.5 million) to 50,000 shoppers in Beijing. Have announced a joint venture together Swift, An inter-bank-messaging system used for cross-border payments. Another champion Sweden has stepped up its pilot project.
The latest big central bank to be serious about CBDC Is the European Central Bank (ECB). Get an opinion on the desired features of the public facility CBDCs, concluded in January, received more than 8,000 responses. Speaking with The Economist On February 10, its president, Christine Lagarde, said she considered seeking the approval of her colleagues to begin preparations for the digital euro. A decision is expected in April. Ms. Lagarde hopes the currency will be alive by 2025.
Like many other central banks, this ECB Wants to provide customers with digital tenders that are as secure as physical cash. Unlike bank deposits, claims on central-bank reserves do not carry credit risk. Instead of using card networks and bank pipes, digital-currency transactions can be settled instantly into a central bank account. In the event that a back-up system can provide private payment channels to fail due to an outage or cyber-attack.
The bank also looks to digital currency to boost the euro’s international role, making up only 20% of central-bank funds globally, against 60% of the dollar. It can settle border transactions directly to foreigners in border-bank money, which would be faster, cheaper and safer than directing through a web of “correspondent” banks. It can make the digital euro attractive to businesses and investors.
Fintech expert Dave Birch says its core streak could offer a level of secrecy that neither the US nor China can promise. The former uses its financial system to enforce sanctions; The latter seeks control. But getting the design right will be difficult: the EU still wants to be able to track cash that is being robbed or hidden in taxes. One certainty is that users are allowed to open e-wallets only after being checked by banks, but only for the use of digital currency, it becomes unregulated.
A wildly successful digital euro could remove deposits from banks and threaten the availability of credit. The solution includes capping the currency that users can hold or as Fabio Panetta, of which he is a member ECBExecutive Board proposed on 10 February – to levy fines on use above the threshold. The digital euro could include “huge legal reforms,” says Hugh Van Steinis UBS, A bank. The “finality of the settlement” – which rules when a payment is completed and cannot be reimbursed – varies across the 19 countries of the euro zone, and will need to be reconciled. Getting started a CBDC Token will take more than effort. ■
For a full interview with Christine Lagarde, go to The Economist / CL Pod
This article appeared in the Finance and Economics section of the print edition under the title “Token Jeeps”.
