Alan Greenspan: ‘No Point’ in Central Banks Issuing Cryptocurrencies (Bitcoinerx)
Alan Greenspan said at an economic conference that there’s no point in central banks issuing their own cryptocurrencies.
The topic of central banks issuing their own cryptocurrency is heating up. Reports say that the People’s Bank of China is getting close to launching its own virtual currency, which will be controlled by the communist state. Former Federal Reserve chairman Alan Greenspan recently spoke at an economic conference held by Caijing, a Chinese financial magazine. He expressed the view that “there’s no point for them to do it” when it came to central bank-issued virtual currencies.
National Currencies Already Solidly Backed
The reason why Greenspan feels central banks have no need to issue their own cryptocurrency is due to sovereign credit. He says national currencies, such as the U.S. dollar, are backed up by sovereign credit, a feature that no private company can offer.
The fundamental sovereign credit of the United States is far in excess of anything Facebook can imagine.
Of course, it should be pointed out that Greenspan is not a fan of Bitcoin and other cryptocurrencies. He once compared Bitcoin to the Continental currency used by the United States during the Revolutionary War. The currency was not backed by anything and eventually became worthless. Greenspan said Bitcoin would likely end up like Continental currency, becoming essentially worthless. He added:
Bitcoin is really a fascinating example of how human beings create value, and is not always rational … It is not a rational currency in that case.
Central Banks Warming Up
A number of central banks are thinking more positively towards cryptocurrencies after lambasting them for years. The governor of the Bank of England, Mark Carney, said the bank is looking at ways to enable crypto companies to access its payment system and keep funds at the BOE overnight. Carney has even met with Mark Zuckerberg to discuss the Libra.
Philadelphia Federal Reserve bank president Patrick Harker said in early October that it was “inevitable” for central banks to eventually begin issuing their own digital currencies. He said, “I am looking at the next five years after that. What comes next? I do think it is something around digital currency.”
However, Harker says he is in the minority when it comes to this viewpoint. Case in point is Bank of Japan Deputy Governor Masayoshi Amamiya, who said his bank has no plans on issuing its own crypto. He said such issuance would disrupt the system, stating:
If central bank digital currencies replace private deposits, that could erode commercial banks’ credit channels and have a negative impact on the economy.
It remains to be seen if most of the world’s nations will allow China to take the lead in bank-issued cryptocurrency, a precedent that Mark Zuckerberg warned Congress about at a recent committee hearing on the Libra.
Images courtesy of Pixabay.
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