I have been asked my opinion regarding cryptocurrencies. Let’s start by saying I have no doubt within only a short time, “cryptocurrencies†will be issued and embraced by central banks. This is not to say I am endorsing Bitcoin, Ethereum or any other digital currency. It is even possible that not a single existing crypto will exist when central banks finally make their leap.
Issuing and embracing cryptos make total sense from the standpoint of central banks for several reasons. First, what crypto bulls consider as “privacy†today, central banks will see as “total knowledge†if they are the issuer. This will mean total knowledge of all transactions which also means a near impossibility of any tax evasion even down to the lemonade stand (assuming you have your lemonade permit!). Also, if central banks issue the cryptocurrency… you can pretty well but they will also have a backdoor …that allows them to either freeze or even empty “your vault†of digital coins…whenever or for whatever they choose.
Whether we are headed toward a one world currency or several currency blocks (this is more likely), digital money is coming if the central banks have anything to say about it. As I mentioned above, I highly doubt central banks will want “competition†to their currencies so some sort of legislation (either by individual sovereigns or collectively on a global basis) can be expected as an attack on existing “private†cryptos. In my mind, there does exist the possibility that an existing currency (or a very small handful of current cryptos) is used as the “platform†for central banks but I would not place my hope on this. I also would not want to bet “which one†or ones will be chosen if this is the case?
In my opinion, the volatility of digital currencies while wicked and speculative (upward so far?) is not the real danger, and the ride is not for the faint of heart. The real dangers are several and basically involve a “poof†moment that does not exist with gold or silver. When I say “poofâ€, I am talking about “poof, it’s gone!â€. Do not say this is impossible because it is not.
