Some of the hypes and speculations surrounding bitcoin and cryptocurrency is that central banks may create their own digital currencies thus replacing fiat money altogether. A G20 draft communiqué already states cryptocurrencies “lack the traits of sovereign currencies” and seeks cryptocurrency regulation recommendations by July 2018. The Bank of International Settlements (BIS) also published a report last month entitled “Money in the digital age: what role for central banks?” stating:
“… while cryptocurrencies may pretend to be currencies, they fail the basic textbook definitions. Most would agree that they do not function as a unit of account. Their volatile valuations make them unsafe to rely on as a common means of payment and a stable store of value.”
Currently, cash is still king and most of the central banks have not gone into the coin business, but the usefulness of cryptocurrency has not been lost on all of us. Countries with serious currency or financial troubles may find cryptocurrency a more stable store of value providing stability to the economy.
Solving Sanctions One at a Time
For example, Iran and Venezuela are both subject to trade sanctions from the United States. Venezuela in particular is suffering from triple-digit annual inflation rate set to jump to more than 2,300 percent in 2018 according to IMF. The nation’s official currency has lost much of its value amid recent political turmoil that Venezuela came up with an oil-backed “petro” cryptocurrency and raised more than $735 million.
Iran government also announced in February that state-run Post Bank is working on developing a cryptocurrency. There are also reports linking North Korea to cryptocurrency mining and other attempts to use the digital currencies as a way to evade sanctions and that Kim Jong-un could own as much as 11,000 bitcoins worth about $87 million at today’s price.