Cryptocurrencies should be considered an important precedent, but so far very small. The capitalization of bitcoin in August 2017 passed the mark of $ 65 billion – not such a huge figure if we compare it, for example, with $ 18 trillion of US GDP in 2016, or about $ 100 trillion of the total volume of the value of world monetary units. When you look at these numbers, you understand that investing in cryptocurrencies does not give you too much room for maneuver. If you’re an asset manager, for example, you can think of bitcoin as a small, “fun” part of your portfolio: you invest no more than 1% of your assets in bitcoin in anticipation of projected growth.
Bitcoin and Central Banks
According to the Crypto Daily News, the penetration of bitcoin and cryptocurrencies into the real economy is still small, it cannot be said that they challenge Central Banks. The spread of cryptocurrencies is constrained, among other things, by legislative restrictions adopted in different countries. At the same time, there is a tendency for further tightening of regulation. The SEC has already equated cryptocurrencies to assets: the American regulator considers it right to consider them not as ordinary currencies, but as stocks or bonds. The Singaporean authorities, on the contrary, consider cryptocurrencies as a means of payment, and not an asset.
One way or another, the fact that cryptocurrencies are gaining recognition from regulators means that they will not become a “challenge” for central banks. They are already beginning to integrate into the overall financial system, its traditional players, having figured out the position of the regulator, will be ready to work with them. So cryptocurrencies will change the way they interact with the consumer of financial services, but will not change their essence – all transformation processes will go under the control of central banks.
Bitcoin and Cryptocurrencies
Imagine a situation where representatives of some countries that have not yet secured the regulation of cryptocurrencies decide to create their own independent cryptocurrency. What is her future? I think that, in addition to technological aspects – how a distributed system can provide cryptocurrency turnover with a potential volume of trillions of dollars – there is again the question of its global distribution. It was not achieved, for example, by the Chinese yuan ( according to SWIFT, its share in the total volume of settlements in the global market is only about 2%), and yet it is still the currency of the second largest economy in the world, the Chinese authorities are making great efforts to strengthen the yuan as an international currency.
Will it be possible to achieve great results with a cryptocurrency issued not by one state, but by an anonymous group of people initiating the project we are talking about? In my opinion, it is unlikely that such a cryptocurrency will be able to occupy a really large space in the global volume of transactions. It will face restrictions in individual countries from regulators who will be eyeing the new cryptocurrency and feel dissatisfied with the fact that someone other than them determines monetary policy in their countries.
Another factor proving that there will be very few opportunities to defeat the central bank for any cryptocurrencies is the tough policy of regulators regarding the withdrawal of capital through bitcoin (we observed this, say, in the actions of Chinese regulators at the end of 2016).
Governments are well aware that if you have restrictions on the “leakage” of capital from the national economy, they should apply to the entire range of instruments available within the country. So I think that regulators will not want to give away their power to cryptocurrencies. In general, this is normal: they are responsible for the financial stability of the country and the development of its economy as a whole.