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Big Banks Talk Cryptocurrency


When big banking institutions begin talking about cryptocurrency, that’s saying something. This week, the Bank for International Settlements released a report on the possibility of central banks creating their own cryptocurrencies.

Who is BIS?

For reference, the Bank for International Settlements, or BIS, is an international financial organization based in Switzerland. It’s owned by 60 member banks, representing countries from around the world that together make up about 95% of the world’s GDP, according to the organization’s website.

This is all to say that the BIS isn’t exactly a trending newsmag. BIS talking crypto means tides may be shifting.

What Differentiates Cryptocurrency from Cash?

Cryptocurrency is defined by three things: it’s electronic, they’re not the liability of anyone, and they feature peer to peer exchange.

Cash isn’t electronic, it’s the liability of the central bank from where it originated, but it does feature peer to peer exchange.

There are things that have aspects of both. For example, Venmo is electronic and features peer to peer exchange and absorbs liability.

Why Would a Central Bank create a Cryptocurrency?

If a central bank created a cryptocurrency, it could begin to eliminate the need for banking institutions. 

If consumers can access cryptocurrency directly from the central bank, it maintains the relevance of central banks. It also makes it universally accessible, a key point of cryptocurrency. Late adapting consumers are more likely to adopt cryptocurrency when it comes from a central authority.

A cryptocurrency created by a central bank wouldn’t compete with existing currency, but would instead be an alternative form of the same sovereign currency.

Do CBCC’s Exist?

Central Bank Cryptocurrencies, or CBCC’s, are in the early stages. Canada has the CADcoin, which hasn’t yet been released to the public market.

There’s fear that creating a retail CBCC would cause a run on banks. Bank created cryptocurrency would be more stable than traditional cryptocurrencies. The availability of a stable cryptocurrency could cause people to remove their money from banks in exchange for placement in stable cryptocurrencies.

While several countries, like Sweden, have projects underway, there isn’t any country yet will a fully adopted CBCC.

While there’s not any government-endorsed CBCC’s, cryptocurrencies are definitely here to stay.

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January 2019
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