Central bank officials have projected their concerns onto investors, banking executives and the general public as to how much peer-to-peer decentralized virtual currencies such as bitcoin and litecoin could revolutionize both payment systems and currency. From making financial institutions obsolete to obliterating fiat money, governments and banks are worried.
Delivering a speech at the Royal Numismatic Society in Wellington, Geoff Bascand, Reserve Bank of New Zealand (RBNZ) deputy governor and operations head, came to the conclusion that bitcoins and other digital currencies could very well replace cash in the future, a dire prospect for the banking and government establishment, according to a report published by the International Business Times.
Bascand outlined both the advantages and drawbacks of bitcoins. Some of the benefits of virtual currency are that it offers the marketplace an alternative low-cost method of payment and store of value, it maintains sturdy security features and the aforementioned perhaps makes bitcoins better than the conventional payment options.
On the other hand, according to Bascand, there are a number of other shortcomings, including the paucity of businesses accepting bitcoins, the volatility in its price and its inability, for the time being, to maintain trust and anonymity.
The central banking official presented the case that trust is needed to resolve an obligation, while bitcoins cannot be paid anonymously because there is always a related identifier to every single transaction on the public ledger, otherwise known as the Blockchain.
Although Bascand doesn’t believe traditional payment systems and currencies are threatened at this very moment by cryptocurrencies, he recommended that central banks should just monitor the developments of digital currencies and identify the changing needs of the consumer. In other words, sit tight and don’t act in haste.
We reported in April of how the National Australian Bank (NAB) would be shutting down business accounts affiliated with bitcoins. The major financial institution cited how it doesn’t bank or trade in other unregulated currencies and wants to ensure its clients are safe and secure.
In June, the Australian Tax Office posted new rules that would apply capital gains taxes to bitcoins.
