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The BIS's ideas: Should central banks spend their own digital currency? | News

Sunday, September 17th, 2017 | bitcoin updates

BASEL (dpa-AFX) – It is a question that should not be asked: Should central banks issue their own digital currency such as Bitcoin? The fans of Kryptowhrungen have probably a clear answer to that, no. The concept of Bitcoin and Co. does not provide for government agencies to gain control over digital currencies. But there are incentives for central banks to penetrate this market and adopt the concept. This is the conclusion reached by the Bank for International Settlements (BIS) in its quarterly report, published on Sunday. The BIS is concerned with the issue, but is a bit explosive, as a "bank of central banks", as a representative of the old financial system many crypto money fans critically. On the other hand, the BIS itself also sees itself as a "think tank", which often deals with questions that are fundamental in nature and often do not encourage clear answers. The BIS does not have a clear position on the question of whether digital central bank money is meaningful, but rather has advantages and disadvantages. One advantage of the central bank crypto money is that it would probably fluctuate considerably less in value than traditional digital currencies , How severe these price fluctuations can be, for example, is shown by the "crypto-crypto" Bitcoin, which has suspended this year between 1000 and nearly 5000 US dollars. The price fluctuations of traditional currencies such as euro or dollar can be negligible compared to it. In addition, Krypto-Zentralbankgeld counter the banks in their monetary policy. So it is technically possible to pay interest on digital money, writes the BIS. "If central bank crypto would completely replace the cash, it would not be possible for investors to avoid negative interest while keeping central bank money," the BIS said. With negative interest rates, central banks want to make savings unattractive, stimulate borrowing and ultimately boost growth and inflation. This idea, however, confronts the existence of cash into which investors can go, because it can not be covered with negative interest. Every decision to introduce central bank crypto money has to weigh the advantages against the disadvantages, writes the BIZ. This is a danger that bank runs, which are a mass attack on bank accounts, would be easier because bank deposits could be converted quickly and easily into central bank kypto money. Moreover, digital money from central banks poses a risk to the business model of the traditional banks because they would be part of their economic functions, the BIS warns. In principle, transactions with cryptos are done anonymously because the exchange can be done directly between the parties (peer-to-peer). It is a matter of principle whether this is considered "good" or "bad". Positive are those who do not want to give up their identity – for whatever reason. The critics of the cryptogels, which among other things disguised criminal acts, are negative. The BIS suggests that there are legitimate reasons for maintaining anonymity in the field of payment, for example to avoid identity theft. It is, however, a difference whether the identity is held secret from the transaction partner or third parties, such as a central bank or the finance office. The latter is seen as critical by many observers because it can encourage criminal activities such as tax fraud or terrorist financing. Similar reasons are mentioned when the limitation of cash payments or even the abolition of cash is required ./bgf/jsl/zb/das


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