How Central Banks Intend To Fight CryptoCurrencies

Tyler Durden's picture

Submitted by Louis Cammarosano of Smaulgld

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Based on remarks to Bundesbank Policy Symposium in a Speech “Frontiers in Central Banking – Past, Present and Future” contain clues of the battleplan. What if they fail?

As cryptocurrencies, which trade outside the banking system attract more capital, governments and central banks are devising ways to try and stop and or control their rise.

In “Cryptocurrencies Fiat Killers or Strengtheners” we noted how some Ethereum projects aim to make blockchain assets spendable through the banking system via connecting them to Visa and Mastercard.

In “Bill Would Require a Declaration of Digital Currency Holdings at the Border” we noted that the US Congress has tasked the U.S. Secretary of Homeland Security and Commissioner of U.S. Customs and Border Protection to devise a plan to stop the flows of cryptocurrencies into the country.

Last week, at the Bundesbank Policy Symposium, in a speech entitled “Frontiers in Central Banking – Past, Present and Future” Dr Jens Weidmann, President of the Deutsche Bundesbank and Chairman of the Board of Directors of the Bank for International Settlements gave a speech outlining some ideas on how to best address the challenges that cyrptocurrencies pose to central banks.

digital currencies bitcoin litecoin monero ethereum

The Plan

After explaining that central banks are creatures born of crisis in that they are designed to come to the rescue when there are financial crisis, Dr. Weidman, noted that market interventions by central banks often provide financial stability, but not with out creating additional risks.

Towards the end of his speech, Dr. Weidman remarked that policy intervention may be required, not to address a crisis, but to address technology. Digitalization has the potential to provide financial benefits to the economy, with the risk, however, of disintermediating central banks. As such, the ability of central banks to conduct monetary policy diminishes proportionally to the increase of digitalization.

Dr. Weidman dismisses the notion that privately issued digital currencies may eliminate central bank currencies, reasoning that “central banks are better able to deliver price stability than a rigid monetary rule or an algorithm.”

Therefore, one consideration might be that the central banks themselves would issue their own digital currencies- something that the central banks of Russia and China are considering. If central banks created digital currencies it would make those holding their liquid assets in the form of central bank digital currencies, the public would have greater protection because “central banks cannot become insolvent.”

Dr. Weidman notes that in times of crisis, money holders would withdraw their bank deposits and transfer them into the official digital currency, thereby rapidly withdrawing liquidity from the private banking sector in a digital bank run.

Without deposits, Dr. Weidman observes, banks could not make loans.

Weidman’s Conclusion

“My personal take on this is that central banks should strive to make existing payment systems more efficient and still faster than they already are – instant payment is the buzzword here. I am pretty confident that this will reduce most citizens’ interest in digital currencies.

Discussion

1. Will “instant payment systems” run by central banks render public interest in private cryptocurrencies irrelevant or keep them at the fringe?

2. What if the central banks create instant payment systems, but the public interest in cryptocurrencies does not abate?

3. Will central banks instead create their own digital currencies and in effect kill off the private banking sector and become the banking system in their respective countries with the abilities to create loans, make credit decisions, issue credit and track all transactions?

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montresor's picture

Cutting the power would do it too

bamawatson's picture

correct, just that simple; only question is, when

secretargentman's picture

And how? Is there a nuke aboard the NorK satellites? 

Manthong's picture

 

“Without deposits, Dr. Weidman observes, banks could not make loans.” 

Bullshit.

That is an illusion they want to maintain.

All they need is a keyboard to capitalize all the banks on the planet a million times over.

That’s what the last decade has been all about.

 

hmmmstrange's picture

If they need deposits, they could always offer some reasonable interest in exchange.

A L I E N's picture

Hands down the best comment of the year ^

SoilMyselfRotten's picture

I dunno, i think most countries would love to go cashless for ultimate control and Cryptos get them there. They may well co-opt the industry.

ultraticum's picture

Did Herr Dr. Weidman say how central banksters were going to abolish MATH?

 

If they don't get to solving that intractable problem soon, they're toast.

 

On a long enough timeline the survival rate for everyone drops to zero.

Mango327's picture

Maybe the ESF / NY Fed / Citadel combo would work better, works for Gold!

IS THE DEEP STATE ATTACKING BITCOIN?
https://youtu.be/PICJk9hz7mw

French Bloke's picture

As far as I'm concerned, the whole argument regarding CB's creating crypto's to regain control is a non starter. They'll be priced in USDS, GBP, JPY & EUR and the ability to expand the base will always be there. So nothing will be solved compared to the limits in place for the capacity to generate more BTC, ETH, etc. So non CB crypto's will always hold their value complared to the CB's.

Of course, additional non CB crypto's can be created (ie.Litecoin and more) so that is an expansion of the non CB crypto base which may eventually dampen the price of these crypto's overall.

The actual plan may be that CB's unofficially create new crypto's masquerading as uncontrolled, thus fooling the public into thinking that they are just like all the others. Then they can expand the base at will without public awareness. They may already have done so but we'll be the last to know.

targayren hous's picture

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... www.jobproplan.com

Bunga Bunga's picture

Right, but then financial repression does not work.

Jimmy Jimmereeno's picture

Def.  insolvent:  unable to satisfy creditors or discharge liabilities, either because liabilities exceed assets or because of inability to pay debts as they mature.

"...because “central banks cannot become insolvent.”  That is a fallacy.

Def.  bank credit:  banks create loans (credit) out of nowhere - without/prior to  positive balances in creditors' accounts.

"...Without deposits, Dr. Weidman observes, banks could not make loans."  That is a fallacy.

 

Freedom Activism's picture

They require deposits, they 'want' deposits... otherwise they have no control. Cryptocurrency is ending their control, and it will work, because their foundation is made of sand. The sand storm is coming!

Freedom Activism's picture

This new decentralized blockchain internet is amazing...innovation is changing the game!

Blockstack: A New Decentralized Blockchain Internet That Brings Privacy & Property Rights to Cyberspace http://www.unifyevolution.info/forum/technologyscience/new-blockchain-in...

UmbilicalMosqueSweeper's picture

More than one way to deliver the various forms of nukes. Emp can also be generated without one.  Is your hard drive hardened?

Vlad the Inhaler's picture

Or just the data connection will do.

Ajax-1's picture

Various western central banks have desired a digital crypto currency for a while now. I would not be surprised if "Bit-coin" is actually a test pilot program sponsored by the Federal Reserve.

factorypreset's picture

The comments for this article should be fun

secretargentman's picture

Even more fun watching bankster controlled governments trying to stop crypto currencies. 

AtATrESICI's picture

Bitcoin is just getting the sheep ready for digital currency issued by the CBs... + Accenture, Microsoft demo blockchain for digital identity... When your not able to lick the boots of the people in the club you will really be fucked...The banker overlords will be able to just turn-off the spicket...and your done.

Crypto-World-Order's picture

Stay off fear porn youtube, its obviously got you trained like a typical cuck.

AtATrESICI's picture

I would love to see the CBs crash and burn more than 99.999% of the world's population. I own, sell, trade, and make money from cryptos. /me I do not have the slightest inkling that the owners will allow cryptos to over take their monetary paradigm. Have you seen the video of the last moments of Gaddafi's life? If the MIC/Bankers/Owners were able to take down a sovereign leader in a sovereign country, what do you think they're going to do to a handful of dudes who write algos for a living?

I hope to be totally fucking wrong. Real wealth/power is for the Owners it is not for us surfs. Like i have said before try and start a fintech or just a crypto ATM, then get back to me regarding the banking and regulation systems love for crypto.

Prisoners_dilemna's picture

The house niggers always talked a big game... but never threw off their chains.

 

Decentrilization bitchez.

AtATrESICI's picture

Decentralized on the Owners telecommunication network...OKAY...The bitcoin foundation has a great P.R. firm.

ctrent33's picture

Get lost jew banker criminals.

Schmuck Raker's picture

"Why are you always going on about [Jews] Stan?"

LetThemEatRand's picture

Crypto currencies are to central banks as legalizing drugs would be to drug cartels.  The CB's won't go down without a fight, and given the fact that they own this place and literally fund the MIC, I doubt crypto is going to win it.

AtATrESICI's picture

Not to mention how do you pay your bills in crypto in the US without involving the banking system... We're back to the van selling crypto's behind the truck stop...

Crypto-World-Order's picture

No one would even want to pay bills with crypto. lol you old fucks are fucking clueless.

LetThemEatRand's picture

We'll see who is clueless in a few years.  With age comes wisdom.  And let me tell you that going from a young asshole to an old fuck happens faster than you think.

Crypto-World-Order's picture

Its always in a few years  around here ,do you fucks ever live in the moment? Sucks to wrong and pissed off all the time. 

LetThemEatRand's picture

Well, I'm enjoying a cold one and posting here so that's kind of living in the moment.

Cryptos are fighting the Fed.  The Fed has been around for more than 100 years, and is stronger today that it was yesterday because it owns the politicians, the police, the military, and the MSM.  Is it possible to beat them anyway?  Sure.  Would I bet on it?  No.

Schmuck Raker's picture

"Cryptos are fighting the Fed."

Guess I'll start buyin' some.

In fact, I do believe Janet's giving a babble in London on the 27th... I should buy some behind her back. Haha, the bitch.

tmosley's picture

Age grants wisdom IN A WORLD THAT IS SLOW TO CHANGE.

Now, how fast do you think this world is changing?

Herodotus's picture

Crypto-currency can never be a store of value because there is no limit to the number of currency units that can be created.  That should already be obvious.  As more units are created, the value of each unit will fall in purchasing power if the rate of crypto-currency creation exceeds the rate of goods production.

Crypto-World-Order's picture

Not a store of value huh?

 Lets see

BTC 2700

 

Gold 1250

 

Sounds like a two for one and more to me . 

AtATrESICI's picture

And last night ETH was around 3 USD and some change on GDAX. So what does that mean. Folks with lots of money can control a system. Same as it ever-was.

Herodotus's picture

Tell your wife you bought her a bitcoin bracelet for your wedding anniversary and see what she says.

gold rubeberg's picture

How's that BTC done over the last 5000 years?

How do you expect it will do over the next 5000?

Heck, considering how far technology has come in just the past 50 years, you can't even count on it being around 50 years from now. Anybody remember COBOL?

You just can't take this stuff seriously without wearing some serious short term blinders.

ReZn8r's picture

"Anybody remember COBOL?"

Yes, and RPG (not the shoulder fired rocket).

Hope Copy's picture

FORTRAN an COBOL are still still around and evolved (C, C++ are versions of) when there is the need on the big Unix systems to get fast execution times.  Like three steps away from machine language..  Not many want to program in assembly language.

 

IBM still uses z/OS that is programed in C, C++ and other variants of COLOB

Hope Copy's picture

try walking across the border with $15M in gold..

AtATrESICI's picture

What do you do on the other side of the border with the 15M? Sell it out of the back of the van at a truck stop or run it through a different branch of the BIS....Really I want to know your angle.

Bunga Bunga's picture

The limit is recources, since they are linked to energy (PoW), at least the cryptos with inherent value. Stay away from PoS and pre-mined coins.

Herodotus's picture

With personal nuclear powered electric generators, electrical power will be much more plentiful than it is presently.

Look what happened with the personal computer.

leftofbang's picture

Thats where you are wrong kiddo.

Most cryptos have a hard limit on the amount of 'coins' that can be mined, based on an algorithm shared between all clients.

Don't comment on shit you aren't informed on.

Hope Copy's picture

The crypos are also controlled by redemption fees at the currency exchanges, technically, that's where cryptos become taxable.

AtATrESICI's picture

Dude, I am not too old but just old enough to know people do not relinquish money and power easily. This is a lesson you must learn on your own.