Bitpound takes on Bitcoin
Cryptocurrencies teeter as central banks step in
Money, even digital money, is all about trust. Do we trust the token someone is giving us for the value we are delivering? Do we trust that it will keep its value and be able to buy the things we need in the future?
It’s that simple. The only reason we trust the dollar is that we believe everyone else also trusts the dollar; to hold its value and to be able to be exchanged for assets or goods or services of similar value. No one holds cash for the intrinsic value of the token, beyond collectable notes and coins.
Fiat currencies like the dollar also reflect their countries’ economic performance and financial health. Cryptocurrencies like Bitcoin, on the other hand, have no ‘country of origin’ and are free to reflect whatever value traders and users of the money attach to it – their level of trust. It also makes online payments and international transfers cheap and easy, without banks and their regulatory overhead.
Now central banks want some of that technological efficiency. The Bank of England, one of the oldest, is jumping in with the Bitpound, backed by Sterling and offering near-zero transaction fees. They’re hoping to become the bitcoin of Boomer investors, who are more suspicious of pure cryptos. The Swiss National Bank is approaching digital cash with more caution, as the vested interests in their banking system are still making profits off negative interest rates.
In the United States, no-one seems to be quite sure where the dollar is headed after the ‘Biden Bump’, but the Fed is unlikely to let London eat its lunch. For now, the dollar is still the world’s reserve currency, and as cash goes fully digital, they’ll want to keep it that way.
Will Bitcoin survive? Probably; it’s been called the ‘cockroach’ of cryptocurrencies, impossible to kill. But the altcoins and stablecoins – and traditional banks – will die in the face of central banks’ ability to use regulations to control their digital currency markets.
As Raoul Pal warned us back in 2020, once central banks can transact directly with businesses and individuals, bypassing the commercial banks, everything changes!
Warning: Hazardous thinking at work
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