The central banks and their policymakers hear about Bitcoin or any digital currency, and they have reasons to reject these coins. However, they know that they cannot avoid financial crises and recessions, as seen in 2008. One of the solutions people found to deal with these situations seen in 2008 is a digital currency like Bitcoin. It was in 2008 October when the idea of Bitcoin came. In January 2009, Bitcoin came into the market. However, Bitcoin works on the P2P system, and it can damage the entire banking system wherein we see the central authority resting the case against Bitcoin. Although Bitcoin and crypto can have their risks, these also offer too many benefits for people to sustain. Well, it would be interesting to check how central banks treat Bitcoin in the following paragraphs. You can even explore it on sites like the The Official Bitcoin Revolution site. Let’s explore it:
The first question is, can the BTC will kill the central banks?
Bitcoin came as an alternative to central banks, and it comes with technology and economics. Satoshi Nakamoto, the mystery man, brought it in 2009 and called it independent digital cash that helps you procure anything online. Bitcoin can address a few problems which central banks fail to do so. The following the three major ones:
- Firstly, it reduces the issues of double investment. Every time you get a Bitcoin, it is new and unique. It is secured using the cryptographic method. Hence Bitcoin can be used only once to buy anything and not twice.
- Secondly, it is a decentralized though, yet very much credible system. The trust factor comes with credible and robust algorithms. The network with Bitcoin transactions approves using the nodes and all over the ledger. Even when you disapprove of the node, the transactions come up using the ledger of Bitcoin.
- Thirdly, the network of Bitcoin reduces the requirement of centralized infrastructure with the help of streamlining the process and then distributing the coins. Anyone having the complete node can help in generating Bitcoin at your home. There is no requirement for intermediaries that demands the P2P transfer coming into the blockchain. Hence the network bank is charted using authority for distributing digital coins.
BTC can have several issues
However, the financial liberty coming with BTC can have several issues. These are again three like the above issues.
- Firstly, the status of Bitcoin acting as its status can have transactions. As it comes to people, there are specific legitimate ways of recording the application for Bitcoin. Digital currency has a sound system like any favorite option for illegal transactions like instrumentation.
- Secondly, the status of Bitcoin as a medium of legal transfers is yet not known. Digital currency has now become a legal tender in few nations like El Salvador in South America. However, it remains an isolated nation to do so. Other countries like China and even the US have clamped down Bitcoin and its system in their nations.
- Lastly, Bitcoin remains a volatile currency, and it has a limited supply. As of now, there are around 21M of Bitcoins in the market. It means the mining of bitcoin has reached the said figure. It gives the limitation of the use of Bitcoin in the market. The absence of Bitcoin will make it a lucrative asset for the forecast. With the great price signs, things have become difficult to sustain in the day-to-day transactions.
The use of Bitcoin becomes a problem for central banks; hence they discourage people from thinking about digital coins. Now, we hear about the significant banks-based virtual currencies called CBDCs, which will come soon by these banks. As they distribute these currencies in the market, they have control over it. It will be nothing like a modern currency with the same old traditional elements. It will be recurred but regulated, which is not the case with Bitcoin.
Central banks are now thinking on the lines of digital coins to defy Bitcoin and other popular virtual currencies. However, Bitcoin will not kill banks as they will control fiat currency, and it will not die down soon. So, it is fair to say that digital coins and central banks will sustain in this world.