Culture clash holds back digital currencies

Innovation stalled by failure of central banks and Silicon Valley to understand each other

 
‘Just because you’ve been relevant for the last 100 years does not mean you’ll be relevant for the next 100 years.’

Sunayna Tuteja’s reflections stood out at a digital currency conference in Washington DC last month for two reasons. First, because few people challenge central bankers so directly on the threat posed by digital currencies and second, because this challenge came from a serving central bank official.

As the chief innovation officer of the Federal Reserve System, Tuteja brought some of the Silicon Valley mentality of her former career as head of strategic partnerships and emerging technologies at TD Ameritrade to a room full of central bankers, who are beginning to see the first outlines of a new digital financial landscape.

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Cryptoasset regulation suffering from lack of consensus

Policy-makers divided on whether boom is merely speculation or holds promise of real change

Digitalisation is accelerating, spreading both opportunity and disruption. The number and value of cryptoassets, such as bitcoin, have exploded. Billions of dollars are pouring into new ventures that hope to remake the banking and investment world with the help of blockchain-based decentralised finance.

Coherent regulation could channel this for the good of society, yet there is no consensus among central bank governors, finance ministers or regulators on how to proceed. They remain divided on a central question: are cryptoassets merely the beneficiaries of speculative excess, like the tulip mania of the 1630s, or are they 1998-style dot-coms, containing the seeds of a major technological and economic transformation even if surrounded by speculative excess, naïveté and sometimes fraud?

Senior financial officials fall into four categories on this key question. The dismissive, or most sceptical, regard cryptoassets as a speculative fad destined to blow up and vanish without any policy intervention. The staying power of bitcoin, Ether and altcoins has caused this group to dwindle. More numerous are the active opponents, who worry about the ramifications of cryptoassets on financial stability, consumer protection, financial crime and climate change. These officials want to limit the sector’s growth and keep it from affecting the core banking system and economy.

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Πηγή: omfif.org