Bitcoin and other Cryptocurrency — 3 Big Implications for central banks (2023)

Berry Mathew

Updated on:

Bitcoin and other Cryptocurrency — 3 Big Implications for central banks (2023)

The main cause for the popularity of bitcoin is its value, its significant growth has seen profound effects on financial systems and central banks. Some have made their argument that fiat money is about to become obsolete. Some people even think that established currencies like the yen, dollar, and euro can be replaced by bitcoin. Could crypto and blockchain technology present many opportunities that central banks can take advantage of? Embracing bitcoin will be nothing less than a peril so you need to be aware of it. This blog highlights a few of the effects of central banks on these digital currencies. If you want to try your hand at trading and investing in digital currencies, specifically Bitcoin, you can do so through the, a digital exchange platform.

Why do most people spend money electronically?

Talking about physical currency has become relevant in the contemporary world. On the other hand ideally, people can use it to buy services and goods using fiat currency. Many around the world enable users to transact in the form of physical currencies. Many others can manage to complete the transaction with a credit card and a smart device. Money has been made available in electronic form by the central bank. This means that digital cash is not new.

Using electronic platforms to send or receive money has become a popular option for people over the years. The only difference is that it fulfils its function very simply in the form of a financial system and digital currencies. Through innovation, it turns out that people can convert fiat money into bitcoin without hesitation at all.

Click here – Which are the best NFT marketplaces for Creators?

Can digital currencies be issued by the central bank?

It is being said that the central bank is thinking of issuing digital currencies like bitcoin very soon. This means that people can now deposit digital currencies with central banks if they want. However, bitcoin is one of the very first currencies that has become very popular in a few years and many cryptocurrencies have emerged like this, which have not yet been able to compete with bitcoin. Perhaps the main reason could be that it was the leading cryptocurrency by market capitalization. It is like the new virtual currencies that cannot be interfered with in the prominence and increasing the value of being introduced. The introduction of digital currencies could raise the possibility of the role of traditional banks diminishing as both intermediaries and lenders and could present some problems in times of economic crisis. 

Can depositors withdraw funds from traditional banks and deposit them in other central banks if deemed safe by them? These could be some of the potential implications of digital currencies for banks, but with that said, you will have to wait and see how things pan out here. Limited transactions are currently handled by the bitcoin network. The main peril for this is that bitcoin is a digital asset as well as a volatile currency. The only main reason for this can be that it is a virtual currency with which you can lose your amount while dealing with it.

Click here – What is a Crypto Block Reward? (Explained)

Bitcoin Has Challenges to Overcome

As it is clear from the article that the time and cost of the transactions can be reduced due to bitcoin and its related technologies. This means the efficiency can be upgraded while shortening the cost of acquired capital amount. Although it is beneficial for the instability of the financial market. However, the base of new technologies could undermine the recent ongoing business models which were established by the banks. They are also eligible for making any changes in the existing system to prevent the central banks from operating correctly and stabilize the financial implications. Despite these facts, it is still an issue what would the traditional banks will look like and what will be their role for money making more broadly.