For quite some time now, within the crypto world, there has been talk of virtual government and business currencies. Creations of governments like the Chinese, and companies like Facebook, that seek to be an alternative to fiat money that moves away from decentralized cryptocurrencies. But, at the end of the day, will virtual currencies replace commercial banks? This is a possibility, according to the Federal Reserve (FED).
The era of virtual currencies
At this point, we can safely say that we are entering the era of virtual currencies. Well, since the birth of Bitcoin, the technology that powers the cryptocurrency, has proven useful for dozens of different uses. Including the creation of centralized virtual currencies by governments and companies.
This is how two of the most disruptive projects in modern financial history are born. We refer to the virtual yuan, the virtual currency developed by the Chinese government. And to Libra, the corporate virtual currency backed by Facebook and another twenty large world-class companies, grouped together in the Libra Association.
Both currencies have raised the possibility of a world in which virtual currencies and Blockchain technology play a fundamental role. But not in the way that cryptocurrencies had envisioned it so far. But in a centralized way around an entity or organization.
Well, if the aspiration of cryptocurrencies is to replace the world financial system based on traditional fiat money. Virtual currencies such as Libra and the virtual yuan, could be the true architects of the replacement (or update) of fiat money, through centralization.
The risks to banks
However, an effect that few consider when talking about these new virtual currencies. It is the role that central banks would play once they are launched, and their use becomes widespread among the population. Well, they would allow citizens to maintain accounts in their local virtual currency directly with the central bank. No need for financial intermediation offered by commercial banks today.
For this reason, the Federal Reserve (FED) of the United States, in collaboration with the Universities of Chicago and Pennsylvania, has carried out a study on the impact that these virtual currencies would have on commercial banks. Determining that competition between banks could be maintained, including the country’s central bank. As long as it does not have special advantages over commercial banks.
Of course, trusting that central banks like the Fed will not take advantage of their new advantageous position, in a world dominated by virtual currencies, seems complicated. Therefore, those who propose cryptocurrencies as an alternative to the state monopoly, continue to promote currencies such as Bitcoin. Creating a true race between the different types of virtual currencies. Making this report our Today’s Data here at CryptoTrend.