10 Reasons Why Central Banks Will Miss The Cryptocurrency Renaissance

Tyler Durden's picture

Authored by Eugene Etsebeth via CoinDesk.com,

Eugéne Etsebeth is an ex-central banker who was employed as a technologist at the South African Reserve Bank from 2013 to 2017. During his time at the reserve bank, he notably chaired the virtual currency and distributed ledger working group.

 

In this opinion piece, Etsebeth outlines why he believes central banks won't be able to adapt to innovations in cryptocurrency, arguing they simply aren't set up to compete with sea changes in technology.

It's a familiar trend, one that happened in communications (internet), and that is now playing out in energy (solar), manufacturing (3D printing) and finance (cryptocurrency) – power and control are moving into the hands of the individual and away from nation states.

This has huge implications for central banks, which today enable nation states to maintain their monopolies over the issuance of notes, coins and sovereign bonds. While communications and manufacturing are not their focus, cryptocurrencies and initial coin offerings (ICOs) fall predominantly in the realm of central banks.

In these systems, central banks don't issue legal tender. Rather, miners and algorithms now control the issuance of tokens – effectively, the money supply. Whereas previously banks were licensed to store, send and spend currency, now wallet providers and exchanges allow the same features.

The currency renaissance has arrived and central banks are studying cryptocurrencies, though some central banks are more open to change than others.

Singapore has been investigating the notion of using distributed ledger technologies to settle cross-border transactions in real time, and the Bank of England has experimented with Ripple. Central banks are even looking to build their own versions of central bank-issued digital currency (CBDC).

Even still, central banks are not well equipped to deal with the cryptocurrency renaissance.

In fact, there are 10 good reasons why most central banks will find cryptocurrencies insurmountable. Sure, a small number of forward-thinking (and acting) central banks will maintain monetary competiveness with the burgeoning cryptocurrencies and ICOs that have reared their decentralized heads.

Still, most will succumb to a mix of the following issues:

1. Workforce of the past

Central banks will need to attract and retain fresh talent that will enable them to deal with the new openness and transparency demands, as well as digital transformation and the increasingly complex global world.

2. Slow decision-making

Decision-making in central banks is like wading through treacle – decisions take months because of numerous layers of hierarchy.

Working groups need to compile voluminous and detailed documents that need to be reviewed and signed by all parties before they can proceed to the heads of departments or the deputy governors.

3. Too few technologists and innovators

Academics, economists and big-picture thinkers excel in central banks. The academics ponder on conceptual issues and the economists make interpretations from data, whereas the policy makers and regulators mull over the cause and effect of promulgating laws.

However, technologists are generally not part of the discussion when it comes to policy and economic decisions for currency.

4. Fear of experimentation

Although some central banks are engaging in experimentation, there is a fear of going from proof-of-concept to pilot phase.

This is natural, should a central bank make an error, it may turn out to be a reputation buster – and reputation is the cornerstone of central banks. There is also some trepidation that the early regulation of cryptocurrencies, and associated new technologies, may legitimize their adoption.

5. Territorial and siloed thinking

Central banks are similar to conglomerates in that they have a number of different and distinct departments that require diverse skills and outputs.

These differences make it difficult to approach a new technology and economic tour de force like cryptocurrency, because it doesn’t fit neatly into any one of the industrial-style conglomerate domains.

To highlight the conglomerate type nature of central banks, the core departments and skill sets are listed below:

  • Bank supervision: mainly supervisors and regulators who manage banking licenses and audit
  • Currency management: manufacturing and logistical planners
  • Financial markets: front, middle and back office currency and bond traders
  • National payments: a combination of regulators for payments and technical resources running the RTGS system
  • Research: mainly economists who produce statistics based reports and input into repo-rate decisions.

6. Buy versus build approach

Most central banks do not have substantial software development capability. Therefore any new project will have to buy its technology. There is an acute shortage of central bankers who can explain or use Merkle trees.

7. Stuck in the status quo

A large portion of central bankers are career central bankers, so the desire and ability to change are not incentivised. Change is often considered a threat to staff, and threats are met with jelly-like stickiness to the status quo.

8. Incumbent relationships

Banks are licensed to operate by central banks, giving them the ability to create money from customer deposits.

The central bank asks the banks to protect depositor's hard-earned money and to serve as many customers as it can: i.e. maximizing financial inclusion. The task of banks is therefore to service a nation's citizens at the behest of the central bank.

These relationships and licenses are expensive to buy and will not easily be changed to include new members.

9. Inter-governmental coordination

Just as the departments within central banks tend to be siloed, so too are the intergovernmental departments that look at currency matters.

They cover treasury, financial intelligence (KYC), financial services conduct authority, central bank, tax revenue and secret service units. Each of these units may have different acts and regulations that overlap cryptocurrencies and ICOs.

10. International coordination

Internationally the nation-state must get guidance from a multitude of organisations like the G20 or G7, International Monetary Fund (IMF), Bank of International Settlements (BIS), Financial Action Task Force (FATF) and INTERPOL. International coordination often requires prolonged diplomacy and mismatched agendas.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
InjectTheVenom's picture

 

>>>>    BTC  10K

>>>>    BTC   0

macholatte's picture

 

power and control are moving into the hands of the individual and away from nation states.

Maybe that statement should be written like this

power and control are moving into the hands of the globalists/multinational corporations and away from individuals and nation states.

 

Looney's picture

 

A few days ago I posted about “Crypto-Stuxnet”, a virus seeking and attacking both hardware and software used for mining Crypto-Currencies. Some crypto-fans suggested that a virus might affect software only – the processor or other hardware cannot be damaged.

Here’s how it works, guys.

A regular Light Switch is designed for tens of thousands of cycles – you turn the lights on when you get home. After a while, you flip the switch off. The switch and the bulbs can last for many years.

Now, try flipping the same light switch ON and OFF as soon as you can. After just a few minutes (assuming you can flip it 4-5 times a second), the bulbs will burn out and the switch itself, most likely, will get damaged as well.

A 12 year-old kid can write a program or a script turning a device/service/feature ON and OFF, and it can be done with high frequency – millions of times per second, non-stop.

Keep in mind that any chip, including the processor (CPU), contains millions/billions of “switches”: 1 Megabyte = 1 million bytes (actually, 1,024,000 bytes), every Byte consists of 8 Bits, and every single Bit is a Switch. Yep, just like your Light Switch at home.

My point is that no matter how well the Crypto-Wallets are secured by individual owners, if the mining equipment gets annihilated time after time, the value of a Crypto (or all of them) will evaporate practically overnight.

Now… would you buy a stock of the company whose accounting department gets burned down time after time, even if the company makes an amazing product?  ;-)

Looney

813kml's picture

Apple is way ahead of you with iTunes.

BaBaBouy's picture

They are still out to lunch SHORTING and SHORTING Paper GOLD ...
This is a train wreck coming...
Phys PM's will Move.

Check the latest Commercials paper shorts ...
http://www.cftc.gov/dea/futures/deacmxsf.htm

Son of Thor'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… http://disq.us/url?url=http%3A%2F%2Fwww.jobproplan.com%3A68UoF1LgzM-Yo3S...

Blue Steel 309's picture

Uh. No.

There are vulnerabilities, but this is not one of them.

Most of the reason crypto's are not a threat to CB's is that Point of Sale can always be regulated, which reduces cryptos to glorified baseball card trading.

No matter how secure internally, there has to be a transaction related to a governmental regulated business, bank, or exchange in order for it to have value and legitimacy as a currency.

The type of virus you describe in not practically possible on modern hardware, nor would it work if it were, because it would overheat chips and trigger a hardware shutdown. That could happen many times without necessarily doing permanent damage beyond slightly lowering chip life (which is already finite). Time enough and alarming enough to diagnose and fix. But software doesn't get access to direct hardware control on most modern systems.

ebworthen's picture

If only crypto-currencies were the answer. 

You have a point regarding point of sale and baseball cards with bubble gum.

Bitcoin is the ransom demand of hackers and the currency of the dark web; that's why TPTB will shut it down.

Not to mention it is competition for control of labor (lives).  Why do you think they axed the Gold standard and created paper PM markets?

haha-clinton-dix's picture

Yes that guy must have saw Zero Day. Stuxnet is for industrial systems. That was the scary thing about it. Things you thought were safe, like control boards in a nuclear power plant are just as vulnerable.

There's row hammer, which is you manipulate the memory in such a way to alter addresses outside the stack, but you don't need that. Most devices are exploited already.

As the price goes higher, and more people adopt, the odd stacks up against the new investor in bitcoin. Save your money. If you're an advocate, launch a blog and earn ad revenue, or become a programmer.

tmosley's picture

IOTA doesn't have miners to attack.

So I say, DO IT, FAGGOT.

zebra77a's picture

Bitcoin is:

  • Untrackable, Unregulatable, Untaxable.
  • Bitcoin has $40 BILLION in market cap, while it experiences exponential growth.  At it's current rate of growth it will have a market cap in 24 months GREATER than Amazon...
  • In order for Bitcoin to absorb that much fiat, in a fixed amount of bitcoin (say only 5,000,000 coins are actually actively tradeable) it would require Bitcoin to experience pricing levels from $75,000 to $1.2 million per coin..
  • Yes tax regulators can 'trace you' once you bring the money back - what happens when people do not 'bring the money back.'' and they stay in Bitcoin, prosper in bitcoin, and continue moving towards it. Consider that 115,000 locations in Japan can accept bitcoin that has no known origin.. 
  • This will bring the rise of the 'crypto freeman' people who are leaving fiat - permanently.  Sure they might transact a small amount of transactions in the ever deflating G8 currencies, but their mainline purchases - their wealth is sitting offshore, bursted, hidden in various offshore wallets.
  • Capital will seek the path of greatest efficiency - always!  So a exchange that has a 5% tax will be eclipsed by a offshore one that only takes 1%. 
  • It cannot be stopped without a outright G8 Central Bank movement to halt it among it's plebs that are forced to utilize their deflating fiat. Even then they only have a window of time.
  • This isn't Pirate Bay where 5 years of Clinton Negotiations stopped Piratebay from moving to another jurisdictional haven for only 24 hours, we are talking about massive wealth capital flight.

 

runningman18's picture

Bitcoin is completely trackable, the claim that it can't be traced is on of the biggest lies surrounding cryptocurrencies.  Every transaction is recorded on the blockchain ledger and every transaction can be linked back to the parties involved even if they try to hide their identities.  The Feds have been doing this for years, which is why the banksters love blockchain technology.  The blockchain is the end of private trade.  Goldman Sachs is deeply involved in Bitcoin and developing blockchain based systems, and central banks love the blockchain because it is the key to a cashless society, which is what they've been pushing for all along.  When the banksters introduce their one world currency system it will be almost exactly like Bitcoin.   

buzzkillb's picture

Bitcoin to HODL the wealth, obviously not anon as there was a huge darknet bust a few days ago involving BTC transactions being traced. Zcash, Zen or Hush are going for not trackable transactions. Ethereum for smart contracts. And my particular favorite Denarius which has extremely fast transaction times. A little bit of mixing all of these becomes very interesting in the near future.

Still would watch crypto like one would watch didthesystemcollapse.com daily.

DownWithYogaPants's picture

A little opsec and it can be completely anon.  Try a lappy bought for cash at your local library.  botta bom botta bing it's not going to be easy for da man to do everyone.

KrugerrandFan's picture

A 12 year old kid would also know the difference between a light bulb and machanical switch, and a solid state microprocessor.  I'm impressed you know how to internet.

Looney's picture

 

Machanical…

You is right and I be wrong.

Looney

Crush the cube's picture

power and control are moving into the hands of the individual and away from nation states."

 

Lemme guess, that "individual" is Soros?

Clint Liquor's picture

The Deep State owns the Internet and BTC is worthless without it. Not my playground.

tmosley's picture

>The Deep State owns the Internet

Retard.

Raffie's picture

YES, factless facts to support our world...... where to next on this magical journey?

The Cooler King's picture

I guess you're right.

 

The DEEP STATE 'does not' own the INTERNET.

 

The only thing that can shut down the internet is the GIANT METEOR, but it won't matter because the day after the GIANT METEOR hits, the price of bitcoins will double!

 

It'll be like, FREE PIZZA 4 LIFE (& you're the topping, with onions & garlic because they were underground when it hit, oh maybe some roasted peppers too).

Crush the cube's picture

Define what they really mean by "deep state".  You know, that state from way down in that hot place under your feet.  Than yes, they do own the internet, it's all an electrical virtual construct and that is a main domain of El, the primary entity of the "deep state".  You been spirit cooked if you think it's yours or safe.

AtATrESICI's picture

The internet was developed by unicorns and funded with fairy tears. See below.

"The Internet protocol suite resulted from research and development conducted by the Defense Advanced Research Projects Agency (DARPA) in the late 1960s.[3] After initiating the pioneering ARPANET in 1969, DARPA started work on a number of other data transmission technologies. In 1972, Robert E. Kahn joined the DARPA Information Processing Technology Office, where he worked on both satellite packet networks and ground-based radio packet networks, and recognized the value of being able to communicate across both. In the spring of 1973, Vinton Cerf, the developer of the existing ARPANET Network Control Program (NCP) protocol, joined Kahn to work on open-architecture interconnection models with the goal of designing the next protocol generation for the ARPANET."
...
"In March 1982, the US Department of Defense declared TCP/IP as the standard for all military computer networking.[14] In 1985, the Internet Advisory Board (later renamed the Internet Architecture Board) held a three-day workshop on TCP/IP for the computer industry, attended by 250 vendor representatives, promoting the protocol and leading to its increasing commercial use."
...

https://en.wikipedia.org/wiki/Internet_protocol_suite

Dude, that shit is very very common knowledge and is on wikipedia.com for god's sake.

tmosley's picture

>I won't use things because they were developed by the government

This is why you are retarded.

Think I'll have a glass of Tang. I'll make it up with the delicious tears of you oldbugs.

The Cooler King's picture

I'm guessing 'oldbugs' refer to the people who FOLLOWED your breathless rantings onto 'TF Metals Reports' to CRASH JP MORGAN...

 

Then, 'failed' to make a hairpin turn with your exquisite  'GARTMANESQUE' logic to abandon that, SELL, your 'housefull' of silver, and buy bitcoins (so that they could buy 8 full living room sets of cheap ass furniture someday at OVERSTOCK.COM)...

 

Is that what you mean by 'oldbugs'?

 

Holy Hell!!!

 

WTF are you still doing here???

 

You ought have started your own HEDGE FUND by now and be 'PARTYING IT UP' in the Hamptons this weekend for the 'PRE SOLAR ECLIPSE' party with all the other masters of the universe who still have 8 living rooms to furnish with cheap Chinese shit.

 

 

tmosley's picture

>You stopped doing what I am doing so I am going to cry about it and call you names

Nobody cares what you have to say.

The Cooler King's picture

"Nobody cares what you have to say"

 

Which is EXACTLY, I presume, what motivated you to REPLY.

AtATrESICI's picture

Typically tech R&D is socialized and then transferred to the oligarchs license free. The tech is then used by gov through gov contracts for said tech. Oh you think the FANG and other tech Cos are not funded with In-Q-Tel / Gov funds. If yes then you are naive as fuck.

Is Tang still a product.

Golden Phoenix's picture

Don't worry, the internet will never amount to anything more than a few Unix dorks sending each other bits. Cryptocurrencies will never amount to anything more than a few Unix dorks sending each other bits either.

FreeShitter's picture

Translation "I missed out on bitcoin when it was cheap".

The Cooler King's picture

Out of curiosity, what, EXACTLY, have you purchased with your bitcoins so far since you've owned them?

FreeShitter's picture

I dont sell bitcoins bruh...Like I dont sell my shiny. I sell the dolla.

The Cooler King's picture

I was gonna say

<---clearly, 17 year old 'Raffie' has entered the fray to endow us all with knowledge

 

Note: You can reply by telling me to 'fuck off', but, that wouldn't exactly HELP anyone around here by helping them to KNOW what utility bitcoins have in the first place.

 

But since you don't BUY anything with them, (as you admit), then what 'utility' do they actually have? or, your 'shiny' (which presumably you have), for that matter?

FreeShitter's picture

I dont need the money from them so I dont sell. Others buy pm's with them and what not, overstock.com takes BTC.....shiny? I dont need to sell it either...rental properties makes the $$$$.

 

https://www.overstock.com/bitcoin

The Cooler King's picture

What do I POSSIBLY need from OVERSTOCK?

 

mosley tried to sell me 6 living room sets full of furniture the other day... But, the thing is, that there are 2 dozen furniture stores in my area that have 'GOING OUT OF BUSINESS' signs in the windows, not to mention that I have an entire basement warehouse full of furniture that I'm gonna put into the wood chipper when I find the time.

tmosley's picture

>Ask how you could spend $50,000 worth of bitcoin quick

>Pretend that the thing that was pointed out is the only thing you can buy with them

This is why everyone should tell you to fuck off.

The Cooler King's picture

Me? I don't tell anyone to 'fuck off'...

 

I ask direct questions to people in the hopes of receiving direct answers... You ANSWERED, the other day, by telling me that I could buy $50,000 worth of furniture (IOW ~ 8 living rooms worth of CRAP), from OVERSTOCK...

 

I basically wondered what the 'utility' of that was... Since I didn't say it then, I will now...

 

- I did tell you that I don't need 8 living rooms worthy of crap furniture... Because I have a houseful of furniture... In addition to my houseful of furniture, I have a BASEMENT full of 'classic' furniture that is sitting under dust covers, that I could probably sell at a premium on EBAY if I had the time, but I don't, because despite your OTHER comments that I'm in the 'POVERTY FARM' because I don't own bitcoin... I'm actually not doing so bad after all...

 

- I doubt 'Raffie' has the need for 8 living rooms worth of furnitire either, (unless, he's planning to UPGRAYYEDDD his parents house to a mansion so he can move out of the bedroom)... If I'm INCORRECT about that one, let 'Raffie' come on here and tell me what he/she actually is (in the same way that 'Raffie' has already bragged about selling bitcoins AT A PROFIT and buying PM's with the proceeds... So far, those details are not forthcoming, because, well):

 

- It's ONE THING to be a TEENAGE BITCOIN TROLL

- It's ANOTHER THING to get "NOT PUT IN ASSRAPE JAIL" by "NOT" claiming CAPITAL GAINS taxes

 

So ~ Instead of "YOU" getting involved in this... Let's let "RAFFIE" reply

 

DEATH?

TAXES?

ASSFUCK?

 

pick your poison... (& for crying out loud ~ try NOT to go for the YACHTZEE)

tmosley's picture

Sorry, I don't care to read any more of your inane posts.

Also, I'm not actually sorry.

The Cooler King's picture

Excellent!

 

That COMMENT is worth 'saving'... Thx mos

tmosley's picture

I don't understand the squaking of chickens, sorry.

Don't you have some cow shit to pick through?

Golden Phoenix's picture

You've established you're a statist and a stalker. You've established you're trying to reframe arguments like a pedophile trying to maneuver a kid into position. You've established you have a bag of rice, don't know or care what wealth is for, and can't stand it if others succeed. Good job! I hope this is the life you always wanted.

indygo55's picture

I bought a bunch of bitcoin when it was around $70. Forgot about them till a couple of years ago. There they were right where I left them on a thumbdrive. Earlier this year I bought an office chair, some decorations, an Iphone for my son, and some other stuff mostly on Overstock.com. It was easy. Now im just keeping them off line cuz the price rise is crazy. I can send them to my Coinbase account where I keep my Etherum and Litecoins which I also bought a few years ago. Then convert them to US dollars if I wanted to but not now. The rise is insane. 

A82EBA's picture

I bought a $600 Dyson vacuum for the wife from overstock and 60 oz silver from jm bullion

AtATrESICI's picture

BTC is the intellectual property of Satoshi "Red Shield" Nakamoto Wealth Transfer/Accruement Systems Corporation of Mons Huygens a wholly owned client subsidiary of the Deep State.

Wealth preservation for the ages mother fuckers.

What Could Possibly Go Wrong???

Justin Case's picture

simply aren't set up to compete with sea changes in technology.

Farm it out to the Russians, they're quite capable. They'll probably be the first country to financially control the masses.