Crypto As Future Money: Witnesses’ Accounts Before US Reps In Brief
On Wednesday July 18, four witnesses discussed before the US Subcommittee on Monetary Policy and Trade one-panel hearing on how digital currencies may feature in the future of money. Its chair, Mr. Andy Barr cites the restriction on cryptocurrencies in China and Vietnam, their embrace in Switzerland and Malta and the issuance of digital currencies by the central banks of Ecuador and Tunisia. The four invited witnesses shared their views before the sitting was called off. Below are key highlights of views presented by the witnesses:
Dr. Rodney Garratt
Cash use is on the decline, especially in advanced countries. He cites the adoption of Switch – run by central bank in collaboration with commercial banks – in Sweden by more than 60% of the population and cash use for transaction fallen below 2% by value. “It seems likely that the use of cash will continue to fall and it’s worth noting that there is a tipping point at whicheven if consumers seek to use cash, businesses and banks will not like to deal with it. What happens then?” Options: people may have to transact primarily through commercial bank deposits; people may request for direct access to some form of digital central bank-issued money; and people may turn to privately-issued cryptocurrencies like Bitcoin. There is nothing wrong with the current banking system. The problem starts when physical cash starts to disappear. In the future, central banks will be faced with the highlighted options hence the need for them to be prepared.
Dr. Norbert Michel
Cryptocurrencies have rapidly expanded as well as its underlying technology, hold the potential to transform the financial industry. They should be fostered and not smothered. Electronic means of payment have become widespread as technology has spread. Cash is still the leading payment instrument in the US despite its demise has been predicted since the 1970s. The fact that cryptocurrency is a new option for making payment though it is in its infant stage should be embraced. The federal government should not step in and tilt the playing field. It should treat cryptocurrency and other forms of money neutrally.
Dr. Eswar Prasad
He explains the difference between central bank-issued digital currencies and The US dollar will remain secure for now as a store of value. It is difficult to see an asset with no intrinsinc value and government backing to maintain its value as a store of value. The promise of something like Bitcoin is that it might become an effective medium of exchange but that promise has not panned out as it turns out that it is very inefficient and costly thus giving room for other cryptocurrencies like Tether to gain traction.
Mr. Alex Pollock
To have a central bank digital currency is one of the worst financial ideas of recent times. But it is quite conceivable to think of as a possibility. Inspite of the advantages of cash in certain situations, electronic digital will become ever more dominant.
On the question of whether cryptos are money or substitute it, Garratt notes that it is not money for the purpose of regulation. But in terms of conceptual idea, he adds, it is money to an extent though not a good one yet because of their volatility. He, as well as Michel, note that adoption is key to correct the volatility.
In a released statement with regards to the Congress hearing, eToro’s Guy Hirsch notes that digital assets present unique challenges for regulators because they have properties that don’t apply to current understanding of securities or commodities. He called for more engagement with the industry as any law that Congress will pass on cryptocurrencies will have global impact on foreign companies too. He adds: “Today’s hearings are a great step in the right direction. We encourage regulators to hear more from good actors and companies with an international presence since they would be valuable to this discussion in Congress.”