It’s no secret that central banks are not supportive of the cryptocurrency revolution. We have had many central bankers condemn the use of non-centralised coins including the BoE (Bank of England) and ECB (European Central Bank).
Bank of England advisor Van Steenis is currently working on a review of the future of finance and fintech for the BoE. When asked whether cryptocurrencies could become a threat to the economy or central banking system, Van Steenis said ‘“They’re not a great unit of exchange, they don’t hold value, and they’re slower,”. Interestingly when asked if they could be a threat in the future, he acknowledged that if these issues were overcome they could be a threat to the traditional banking mechanism. As reported recently some of these issues are being worked on at the time of writing.
If you have made an international transfer from a bank and compared it to blockchain and crypto you will know what we are talking about here. Van Steenis did accept that bank customers are looking something cheaper, faster and better and that banks are investing in technology to provide that (Santander and Ripple). Most of them appear woefully behind the curve though when compared to the advances made in blockchain technology and crypto platforms in just the past year or two. Banks still have heavy charges and have over 24 hour (sometimes more) waiting periods for cross border transactions making them extremely archaic in contrast.
So why does Van Steenis think crypto trading is worthless?
Huw van Steenis did say that financial institutions are always vigilant about maintaining their competitive edge and market share. At the moment, he does not believe that bitcoin or any other crypto is a viable challenge to the dominance of big banks.
“Traditional banks are trying to fend off the threats from these new tech platforms,” Van Steenis admitted. “But cryptocurrencies aren’t high on my worry list.” It has been said even at their recent peak, the combined global crypto market value was less than 1% of global GDP and the technology surrounding them can improve traditional banking not move people away from it.
There seems to be some mixed views in the UK. UK MP Eddie Hughes thinks that the UK government should embrace the ‘new world’. Just last year he stated that maybe people should be allowed to pay for their utility and council tax bill with coins like Bitcoin.
Not too long ago ECB member Ardo Hansson, the governor of Bank of Estonia, claimed that cryptocurrencies would die as a complete load of nonsense while speaking at “5 Years with the Euro” conference in Latvia. The policymaker assured that the bubble has already started to collapse and it should continue to do unless the market reaches “a new kind of equilibrium.”
Of course, these central bankers would not want to upset the status quo. The crypto world is uncentralised meaning they would not be able to control money anymore. The amount of money printed and pushed back into the financial system after the banking crisis of 2009 was immense. If the banking system was decentralised this would relinquish their control of the whole monetary system. Some say that is what is needed, a fresh start.