Banking institutions and cryptocurrencies have always had a sour relationship across the globe. The digital currencies have seemed to have threatened the dominance of their traditional counterparts, inviting the wrath of central banks, like the ban imposed on cryptocurrencies by the Reserve Bank of India.
Traditional banks are notoriously famous for depriving crypto companies of basic services, which have furthered the distance between the two worlds. The global economy at large seems to be divided on the subject, as scholars and academicians continue to oppose cryptocurrencies, while giant business corporations continue to invest big in them.
Taking the rivalry a step ahead, Pauline Adam Kalfon, the financial partner at PwC France, stated that central banks of countries should refrain from launching their own cryptocurrencies, and leave the job for companies like JPMorgan and Facebook. She claimed that institutions which are influenced heavily by politics and economy at large must only be observers, rather than tokenizing their traditional currencies. These institutions should make way for the emergence of large corporations on the crypto space, Kalfon added.
Cryptocurrencies have been widely accused of being overhyped and manipulative to increase their volumes. In fact, a recent analysis by Bitwise Global suggests that 95% of crypto exchanges manipulate Bitcoin volume figures, in order to create traction for themselves. Also, several scams and scandals by crypto players have been surfacing for quite a long time now.
One of such examples is the QuadrigaCX Exchange Scandal of Canada, which saw over 110,000 users lose about $190 million, which is absolutely untraceable till date. Had not the premature death of its CEO occurred, the scandal would be even a bigger one. This forced the Canadian government to invite suggestions from market experts and analysts to establish a formidable regulatory framework for the crypto space. Prior to the scandal coming to light, the Government had held back on regulating the crypto market.
Such incidents have forced central banks to either strictly regularise the crypto space or, in some cases, launch their own cryptocurrencies. But scams are not the only reason why central banks or the government launch their own digital tokens. For instance, the governments of the United Arab Emirates and Saudi Arabia have joined hands to create a new cryptocurrency, to facilitate the cross-border transaction and boost economic exchange between the two countries.
More politically, Bank of Russia, the apex banking regulations body, is assisting the government to create its own cryptocurrency, in a bid to minimise the country’s dependence on the US dollar. Similar steps have also been taken by Venezuela.
All this proves that the statement made by Kalfon might be too harsh, given the fact that there are areas where private cryptocurrencies have severely failed. Sure, the emergence of giants like JPMorgan and Facebook will boost the sector in terms of capital investment, and research and development, but totally eliminating central banks out of the equation is not possible.
In fact, Kalfon herself believes that the potential for future monetary tokenization by Central Banks cannot be ruled out completely, citing the example of Venezuela, where the government itself re-issued the traditional currency in the form of digital tokens.
However, Kalfon wants the central banks to wait on the sidelines, and observe corporations like JPMorgan, before taking the fiat-to-crypto route. While directing a piece of advice towards the Banque de France, she said that the French Central Bank is not the best establishment to vouch for developing a cryptocurrency project, due to the prerogatives from the European Central Bank.
In early 2018, the French Economy Minister, Bruno Le Maire had raised caution against dangers and risks of cryptocurrencies. This stand, however, changed by the year-end as the minister started advocating the adoption of digital tokens.