A Romanian Central Bank official recently stated that cryptocurrencies cannot replace currency issued by central banks. The news was announced by a local media outlet Business review.
Daniel Daianu, a member of the Romanian National Bank (BNR)’s Administration Council, emphasised the necessity to be aware of the difference between institutions and their roles. He said,
“In my opinion, these are financial assets, not cryptocurrencies, and they won’t be able to fulfill the basic roles of currency. [...] Cryptocurrencies will never be able to substitute the currency issued by a central bank. What can happen is for central banks to have a digital currency, but that will also be issued by the bank, and commercial banks will receive digital currency that can multiply. I do agree, however, that new technologies lead to disintermediation and this feature of decentralization shows us the merits of networks.”
Romania released a draft Emergency Ordinance that regulates the issuance of electronic money (e-money) last July. The draft described electronic money as the value stored electronically, including magnetic, representing a claim on the issuer issued on receipt of funds for the purpose of performing payment transactions and which is accepted by a person other than the issuer of electronic money.”
A recent report from the World Economic Forum (WEF) revealed that at least 40 central banks globally are conducting research projects and pilots with blockchain technology that aim to address such issues as financial inclusion, payments efficiency, and cybersecurity.
The report notes the best benefits of CBDC to be Know Your Customer(KYC) and Anti- Money Laundering (AML) procedures. These procedures will reduce tax evasion, challenge commercial bank monopoly power and also provide alternatives to private sector payments technologies.
However, there is a potential downside to CBDCs as well, saying that banks should consider the challenges of blockchain technology. These include transaction scalability, key management, transaction speeds, possible financial exclusion of populations who do not adopt CBDC. As this could lead to further marginalization from digital payment systems. More importantly, it can increase risks of financial stability in case of bank disintermediation.
Presently, the WEF provides ten use cases for distributed ledger technology (DLT) аt central banks. This includes the development of retail central bank currency, interbank securities settlement, bond issuance, and lifecycle management. In addition to cash money supply chain, among others.
Another set of institutions conducting projects with blockchain include- The Bank of Lithuania- it is planning to issue “Digital Collector Coin” to test blockchain in a small-scale and real environment. It will be linked to physical collector coins kept in the Bank of Lithuania’s vaults. The bank is also sponsoring a blockchain sandbox called LBChain.