Central Banks And Cryptocurrencies: A Proper Analysis

Cryptocurrencies are the new hot topic, many persons talk about them and more than one pull a nice profit from trading them.

It all started with Bitcoin, and now there are tons of new cryptocurrencies like Ethereum, NEO, Waves, ARK, Bitcoin Cash (a bifurcation of the original BTC), etc.

However, why do they have to do anything with central banks and our current monetary system? Cryptocurrencies have appeared for a reason: they want to disrupt the current system and decentralize economy.

This article will offer you a brief yet concise analysis of cryptocurrencies and central banks, so you can see why they represent a problem for the other, and how they may take advantage of them as well.

How Does Banking Work?

Before we move any further, it is useful for the purpose of this article to check how banking works in case you do not know it already.

Essentially banks are responsible for creating money, but most of the time they do it by lending money and charging an interest on it. That is how new money is born, and in reality, it is created out of nothing.

What they bring their customers are liabilities that they can spend, and that is how they have managed to create money. Those numbers you see in your savings or checking account are liabilities, and strictly speaking, is not real money.

Therefore, banks are interested in the dematerialization of money because it benefits them. Although, what does not benefit them is decentralization, because it would take the power away from them and put it on the hands of people.

If you wish to understand more about how banks work, in a more exquisite detail, then you should visit MarketReview. They have a complete section dedicated to this topic.

Dematerializing Money: A Dream Come True

What central banks want are cryptocurrencies they can control, and therefore, are not decentralized. However, why? Because it allows them to solve the following problems:

  1. Easy and fast distribution of money
  2. Reducing costs of printing money
  3. Keeping theft at a minimum

By fully digitalizing money, and therefore dematerializing it, banks can solve all of these problems. Creating digital money has a cost that is practically zero. Moreover, it is very easy to distribute and much cheaper, and finally, it will keep theft at a minimum by using private keys and other security measures.

Therefore, as you can see, central banks are not against cryptocurrencies, what they stand against is decentralization, because it is not beneficial for them.

Furthermore, by centralizing cryptocurrencies they take the anonymous factor away, which is one of their most interesting features.

More Problems Than Benefits:

That is why we need to keep central banks away from taking power on cryptocurrencies and installing centralization, because if it ever happens, then it will bring more problems than benefits.

First off, by taking away anonymity, people will be instantly subjected to taxation. That is, for starters, one of the major disadvantages people will face if this ever happens.

Furthermore, it is more than likely that will keep doing the same they do as of now: keep printing money and keep the supply increasing. We all know why it is bad, because it raises inflation and therefore our money is worth less.

Overall, it is easy to see why central banks are enemies to cryptocurrencies, because they represent everything they stand against. Therefore, it is mandatory to keep them away, because if they force us all to their cryptocurrencies, then the problems will largely surpass the possible benefits.

Final Words:

We have arrived to the end of this article. As you can see central banks are very interested in the technology behind cryptocurrencies, but of course, for their own purposes. We need to keep pushing for decentralization, because it is the unique way to take down this monopoly and finally bring power back to the people.