The cryptocurrency markets have been in a downward spiral for the entirety of 2018. To the uninformed, it would appear that crypto is a dying fad or a Ponzi scheme.
While it’s true the cryptocurrency market has drastically dropped from its all-time high of over $800 billion to its current state of $128 billion, this industry is far from dead.
Crypto enthusiasts, traders, and investors will tell you this current bear market is simply a natural market cycle and we will experience new all-time highs soon enough. While this is a valid point, to the general public their words do not warrant legitimacy.
To the naysayers and traditionalists, they’d rather listen to what governments and central banks have to say on the matter.
Well, if that’s the case, a recent report by the International Monetary Fund (IMF) shows that digital asset technologies (cryptocurrencies) are being explored by central banks and traditional finance institutions.
Digital Currencies Are Here to Stay
According to the IMF report, central banks from around the world are exploring and testing digital currencies as they recognize that this alternative means of payment may shrink the importance of fiat.
The report emphasized there are central banks envisioning a future cashless society and they want to be a part of that future. They see that a fully-digitized means of payment which is fully secure will be the way forward.
The report’s reason for this viewpoint is largely due to the technological advancements of digital currencies, which allow for faster and easier transfer of assets. The current international remittances lag, are expensive, and prone to error, while distributed ledgers and blockchain technology solve all these issues.
Central Banks are Exploring Digital Currencies
The IMF report is not the first to point out the central banks’ growing interest in digital currencies — other notable news publications have done so as well.
The Washington Post cited the IMF’s report in an article about how the People’s Bank of China has been actively exploring the various aspects of digital currencies.
A news report by Amwal Al Ghad showed that the Central Bank of Egypt is exploring the issuance of their own digital currency.
Furthermore, both Sweden’s and Norway’s central banks have interest in creating a cashless society and potentially issuing their own digital currency using blockchain technology.
The European Central Bank has explored Bitcoin and blockchain technology as well, but concluded that the technology is not yet ready as it faces scalability issues when it comes to handling multiple transactions per second.
However, Bitcoin and blockchain technology is evolving and will one day be fit to handle the throughput our financial system requires. For instance, the Lightning Network has seen substantial growth and is well on its way to becoming a viable solution to the scaling problem for blockchains like Bitcoin.
It’s clear central banks around the world have a vested interest in digital currencies as many of them are exploring blockchain technology and the idea of issuing their own digital currencies.
While this is a positive sign for mainstream adoption, it goes against the mantra digital currencies stand for, which is to invoke freedom from centralized control and gain control of monetary sovereignty.
Cryptocurrencies like Bitcoin have the power to do this as they work as sound money with a fixed supply. They have a simple yet superior monetary policy built into the cryptocurrency itself.
As central banks open up to digital currencies and they become mainstream, the benefits of decentralized and censorship-resistant cryptocurrencies like Bitcoin will likely become more evident to the general public.
Do you think central banks will issue their own digital currencies in 2019? If so, will these digital currencies gain traction and be a success? Or will the masses choose Bitcoin or another form of decentralized money? Let us know what you think in the comment section below.