As the old proverb says: “If you can’t beat them, join them”. Thus, in the face of cryptocurrencies “assault”, central banks, to which governments have entrusted the task of printing money in the last three hundred years, run for cover. The public “Bitcoin” will be called CBDC (Central Bank Digital Currency) and, as the Global Financial Stability Report published by the IMF informs, central bankers are already at work to get it born. In the leading group there is the Swedish Riksbank, which has announced the first experiments for 2018, followed by The Bank of Canada, the People’s Bank of China, and the central institution in Singapore, as the IMF summarizes.
The public Bitcoin will be a real coinage and not a simple accreditation of electronic money, and will be changed on a par with the other currencies. To understand the difference between electronic money that we use today with credit cards and prepaid cards and the new CBDC, the Bank of Sweden makes the following example: if you lose a credit card today, and nobody uses it before you block it, your money will remain in your current account; instead with the new coin coined by central banks, if you lose your card or your electronic wallet, you will have permanently lost your money, as if someone had stolen your wallet full of banknotes.
Initially, the new CBDC, whose issue date has not yet been decided, will be flanked by banknotes and credit card-based electronic money, but the road that leads to the future may see a sudden acceleration. From the customer’s point of view, it will be easier to transfer money from one part of the world to another, partially dis-mediating commercial banks. Central bankers would like to retain their power on money, but now they will be judged by free markets. F. A. Hayek was right: his calling for a choice in currency is finally coming to life. Why is so important? Because this means only one thing: central banks have failed and, as has always happened in the end, they must kneel before the free market.
