Bank of Italy: No Plans for Central Banks to Launch Cryptocurrencies
Bank of Italy Deputy Governor says there are at least no such short-term plans for issuing cryptocurrencies
According to the deputy governor of the Bank of Italy, there are at least no such short-term plans for issuing government-backed cryptocurrencies by the Central Banks of the country. The deputy governor, Fabio Panetta highlighted this information on 7th June 2018, during the keynote speech for the European Money and Finance Forum (SUERF) and BAFFI CAREFIN Centre Conference held at the Bocconi University in Italy.
Panetta discussed the potential of central banks to launch their own cryptocurrencies. These include crypto that has features of bitcoin and the underlying blockchain technology. He also made the following remark as now published in the Bank of International Settlements transcript;
In fact, just like banknotes – a [central bank digital currency (CBDC)] would be a liability of the central bank and would be backed by its assets. It would be supported by the credibility of the central bank and ultimately, by the rule of law. Crypto-assets, on the other hand, are a liability belonging to nobody: there is no asset that backs them up and no clear governance structure that can guarantee trust… The value of a CBDC would not suffer from the excessive volatility that affects crypto-assets.
With relevance to the above statement central bank digital currencies would have the same problem of volatility due to the monetary regulations imposed by the government. This has earlier been a concern for those who look for crypto-assets such as bitcoin.
Advantages and disadvantages for Bank of Italy
As Panetta explains, there are several advantages and disadvantages for the Bank of Italy and other central banks through CDBCs. One advantage is the low cost to manage cryptocurrencies compared to physical currencies. Central bank digital currencies will be free of credit and risk of liquidity;
“Since it would be completely dematerialized, a CBDC would have very few or no storage costs and would be a convenient way for households and firms to keep liquid wealth. Mattresses could be freed from their role of vaults!”
The above effects will not be disruptive for banks. But there are other issues that could cause problems. Panetta raised the question whether cryptocurrencies need to be traceable or designed in a way to guarantee, anonymity to a possible extent. The Bank of Italy has the ethical concern as to whether banks are required to keep track of customer transactions and engage in decisions based on the creditworthiness using that information.
If central banks decided to make an asset – the CBDC – free of credit and liquidity risk, possibly remunerated, and available to anybody at no cost, their role in the economy would fundamentally change… Are central banks ready to play this new role and to deal with the attendant complexities? In the short term my answer is no.
Panetta emphasized the advantages of the research to answer the above question will be certain in the long run and, “here to stay, independently of whether one day we will live in a world with digital cash”.