Banking and financial experts from Dutch bank ING have indicated that soon they will offer a fully-fledged central bank cryptocurrency. They predict that this could be a reality in the next five years.
ING’s lead economist for digital finance Teunis Bronsens and chief economist Mark Cliffe gave insight on the merits and drawbacks of a central bank-backed cryptocurrency.
However, the launch of central bank-backed digital currencies could be fraught with problems for some. According to a TNW Hard Fork report, the shedding of notes and hard currency could do more harm to users than good.
According to the report, one drawback of having a central bank-backed digital currency is that users will lose the anonymity they have when using cash. Having a central bank controlled virtual currency will mean that all transactions will be traceable by regulators.
The ING officials indicate that although no country has yet launched a digital currency of its own, it could be possible soon.
Among the countries that may develop a central bank cryptocurrency is China. The People’s Bank of China has been hiring blockchain experts and professionals to help in developing a cryptocurrency. It has been rumored to be launching as early as 2020.
According to Mark Cliffe, the launch of the Facebook-backed cryptocurrency, Libra, is putting pressure on central banks. There are plans to launch Libra by next year which will disrupt the global financial system. As a result, central banks have been working towards having digital currencies of their own. However, Cliffe says that such a move will open a range of policy options and also provide ways of supporting economic activity in the event of a downturn.
Facebook’s Libra has suffered setbacks in recent weeks. The cryptocurrency faces more regulatory scrutiny from regulators and legislators. It will only become a reality if the parent company satisfies that user data and funds will be secure and safe.
According to a report to be presented to finance ministers at the IMF’s Annual Conference, cryptocurrencies such as Libra could bring some serious challenges and problems. Already members of the Libra Association, such as Visa, MasterCard, and PayPal, have reconsidered their position in the Libra project.
Despite these setbacks, central banks are no longer waiting for Facebook or some other big tech player to force their hand. They have been set on a path to develop their own digital currencies and now it is just a matter of time.