Central banks worldwide have been quick to dismiss bitcoin and other cryptocurrencies as legitimate currencies. Instead, they view them as any other asset and they would be either subjected to a value added tax (VAT) or capital gains. However, central banks themselves might enter into the growing virtual currency market.
According to Peter Warburton, director of U.K.-based Economic Perspectives, an economic consulting firm, it won’t be too long until bitcoiners realize that central banks will gain a footing into their own realm because the industry has become “persuasive and credible.”
“It’s fair to point out that even with today’s very low interest rates, there’s something very attractive about having your own currency and, basically, those bills that we carry around with us don’t pay any interest at all,” said Warburton in an interview with Newsmax. “It’s free money for the issuing body and so this is a privilege that central banks want to hang on to.”
With bitcoin gaining negative publicity over the past month due to three exchange shutdowns – Mt. Gox, Flexcoin and Poloniex – a lot of finance and tech experts think the end to the digital currency is near and this would allow central banks everywhere to begin adopting the same kind of technology or principles affiliated with the industry. All it would require is an improved cryptocurrency model.
The concept behind digital currency, says Warburton, is necessary because there has been a lot of faith lost in central banks and financial institutions outside of the United States, especially since the economic collapse in 2007 and 2008. This is part of the reason why exchanges are established overseas.
“Obviously there’s an aspect of safety in the financial system, and the banking system here has kind of resisted getting involved,” added Warburton. “Whenever you are dealing with the means of payment and purchasing power, then you create an enormous incentive for deception.”
He concluded the interview by arguing that there needs to be an arsenal of trust, which something that bitcoin lost when tens of millions of dollars were lost in the aforementioned exchange platforms.
Is there any validity to his argument? Well, there are many theories out there: one of them is that central banks feel threatened by an institution like bitcoin and so they will refrain from legitimizing it. Another theory is that the major banks and credit card companies are also on the defence because they could be taken down – that is if these entities didn’t have the power of the state behind them.
JPMorgan has filed for a bitcoin-like patent 175 times, eBay has filed a patent application for programmable money similar to bitcoin and Ericsson has also filed a bitcoin related patent application.
Are these signs that the major players want to get in on the bitcoin market and attempt to beat it?
Perhaps the Federal Reserve, the Bank of Canada, the European Central Bank and the Bank of England will be the next issuer of cryptocurrency.
