The blockchain revolution that has resulted from Bitcoin’s creation has not gone unnoticed by the Central Banks and governments of the world. Visit the (Official Trading Platform) to access the best trading platform for cryptocurrency trading. Furthermore, governments have started to take notice of this new technology to disrupt their power and control to keep themselves relevant in the slowly evolving world. Considering this, some Central Banks are fearful that they will become obsolete if they do not adapt soon enough.
As they feel increased pressure from financial institutions and other countries looking at other ways to manage their economies with new technologies, these banks are shifting their focus towards more experimental areas rather than pure interest rate policy. For example, these Central banks are starting to work with blockchain technology and decentralized currencies, looking toward new ways to finance and regulate their economies.
Central Banks do not see themselves as irrelevant in the future of the financial world but are looking at different ways to keep control. While other countries that have historically lost control of their economic systems see this to regain it, Central Banks are generally set on keeping power over their economy for it to work efficiently. The main question here is whether bitcoin can kill the concept of central banks; let’s discuss.
How Can Bitcoin Impact Central Banks?
As institutions, Central banks look forward to finding a way to keep their power, even though they know that the world is moving forward at an exponential pace. As a result, central Banks see Bitcoin as a threat; some even claim that it is not just a threat but an actual “existential” one.
Bitcoin’s decentralized structure makes it impossible for any entity to control it as every node contributes its piece of information and receives proportional compensation for doing so. It is what makes bitcoin different from all other traditional currencies.
By choosing a decentralized system over an authoritative one, bitcoin puts the control in the hands of the users who decide how their economies will run. They can store their money and keep it safe without paying any interest; they can decide what to do with it and when to do it, not depending on anyone else’s timeline.
While this benefits users, such a structure has no place in a Central Bank’s ideal economic system as they cannot control or influence it as they want. Since people are losing trust in banks anyway because of all the scandals revealed on how financial institutions operate over the years, the reliance on bitcoin is skyrocketing.
Eliminates a Central Decision-Making Authority for Recessions:
Since bitcoin relies on users to decide what they want to do with their money and the decentralized network that gives them the power to act on it, no Central Bank or any other authority can decide for them.
Bitcoin provides a way out of Central Banks’ hands in times of financial crisis. Since people can transfer their digital assets at any given time, there is no need for Central Banks to provide a stimulus package or bail out banks to prevent a recession. Theoretically, if an economy relies solely on bitcoin, it will be safe from crises, unlike the economies with existing Central Banking systems today.
Increased Electronic Money Transactions:
Blockchain technology offers a new way to transfer funds. Since bitcoin is based on blockchain technology, we can assume that the future of electronic money lies solely in its development.
With solutions such as smart contracts and settlement systems being developed for bitcoin, more people will start using it for everyday transactions for goods and services. It is known as e-money and, if successful, could replace traditional payment platforms altogether.
Improved Transparency in Financial Transactions:
Bitcoin’s transparency is what sets it apart from the traditional banking system. Since its creation, bitcoin has been praised for providing total transparency to everyone who owns bitcoins. The blockchain technology behind bitcoin also shows that every transaction involving bitcoins is entirely transparent and verifiable.
All records of past transactions involving bitcoins cannot be altered by anyone, meaning no one can tamper with the records of your transactions or take control of your account. This transparency is sure to make governments and Central Banks realize that they too need to be accountable for every bit of money they spend, which is not always the case in the banking system today.
The biggest challenge that the Central Banks see with bitcoin is not its decentralized accounting structure, but the fact that it allows anyone to store and transfer their money without going through a financial institution. Bitcoin provides a transfer of funds at any given time, eliminating many constraints that are currently present in banking systems.
