The advent of cryptocurrencies does not arouse a wave of enthusiasm among central banks,
far from it. Because these new means of exchange represent neither more nor less than a frontal attack
against a two-tier payment system (that of the commercial banks which collect deposits from the
public, and that of the central banks which, on the strength of their monopoly, regulate the liquidity of the whole) of
less and less able to conform to the demands of the on-going digitization of the economy.
This dual system, three good centuries old, has hardly changed since its origins. Relatively slow
and costly, banking intermediation leaves far too many banks and far too many
paid for a service whose automation should reduce the cost to virtually zero. As to
central banks, they are overtaken by financial innovation that blurs the channels of
transmission of monetary policy. They have thus come to drown the banking apparatus under floods
of currency which immediately return to the reserves held with them instead of being used to
revive business credit. The height of the paradox, this profusion of primary liquidity does not prevent
the random triggering of liquidity crises, such as the complete drying up of the interbank market in
United States which very recently led the Federal Reserve to intervene massively to bring down the
repo rate (securities repos), which had soared to 10%.
In view of these delays, these costs and this increasingly glaring inefficiency, it was only natural that
financial innovation is emerging everywhere. The windfall effect first gave rise to bitcoin and a host of
other cryptocurrencies based on distributed ledger technology, which circumvent the monopoly
of central banks and bypass banking intermediation as a whole. Problem,
the price of these electronic currencies exchanged between peer computers and negotiable in the form of
«tokens» (tokens) vary in hectic proportions to say the least.
Hence the idea of stable cryptocurrencies, with Libra as the figurehead. Their value is no longer random,
but backed by a base of flesh and blood assets (hard currencies, precious metals and so on). From
Suddenly, especially since the potential circle of users brought together by Facebook is in the billions, the
competition that these digital artifacts represent for monetary systems has become very real,
arousing the scrupulous and suspicious attention of central banks. We're not going all the same
tolerate the unsupervised development of payment networks exposed to all kinds of
risk of slippage, failure or even criminal use specific to private initiative innovations.
Therefore, efforts are being made at all levels, including the highest (G20, FATF, etc.) to prepare the ground for
a domestication of these new financial circuits. For us, FINMA has already drawn up in February 2018
a “Practical guide to liability issues concerning initial coin offerings (ICO)”.
But the reaction will not stop there. It's a safe bet that the next step will be for the banks
centers - even if they still pretend to oppose them - to commit themselves more fully to the path of
"central bank electronic currencies", i.e., specifically, the extension to the public of access to
deposit accounts with them.
Bye-bye accounts with commercial banks, if they are slow to reform!
“Next step, the extension to the public of access to deposit accounts with central banks”