Spanish central bank: Public cryptocurrencies can facilitate monetary policy

State cryptocurrencies could facilitate monetary policy and thus central bank activities. In particular, blockchain technology could help to control interest rates and cash flow, leading to greater financial stability. This is the conclusion reached by Banco de España (BDE), Spain’s top currency institute, in its recent report on the influence of state crypto currencies. Nevertheless, the central bank urges caution. Blockchain technology may be a positive factor for the country’s economy. Nevertheless, it needs further research and an eye for possible risks.

Even the bank is – while the Spanish central bank Bitcoin and Co with a critical eye for a long time, emphasizes the highest tax authority of the country in its recent report the possible Potenziale of specially controlled digital currencies. This could facilitate the management of national monetary policy and thus support the country’s economy.

In particular, under the title “Possible Consequences for Monetary Policy”, the report highlights the possibilities of controlling monetary policy. While the central bank is currently unable to effectively monitor it, such control is possible through specially issued digital alternatives, the report said.

While the guidelines for monetary policy in Europe are adopted by the European Central Bank, the central banks of the member states and the BDE are entrusted with their national management. In addition to the processing of payments, this also includes the administration of national foreign exchange reserves.

State cryptocurrencies as economic engine?

The report also states that blockchain technology can help improve interbank payments and manage short-term interest rates. State-spending cryptocurrencies could prove to be an effective tool to control demand and thus the economy in the country. In the opinion of the report, savers and borrowers would benefit from the improved interest conditions. This would ultimately strengthen the Spanish economy.

This is currently experiencing a long period of unexpected economic consolidation. While the country was still one of the countries most affected by the euro crisis, the economy and the labor market on the Iberian peninsula are increasingly recovering. The BDE is currently expecting growth of almost two and a half percent for 2018. Nevertheless, the country continues to groan under an above-average unemployment rate of around 17 percent – above all young people are affected.

Nevertheless, Spanish central bank warns caution

However, for blockchain technology to be able to make a contribution to the economic upswing in the future, it should be extensively researched. Thus, an intensive study of their applications is necessary without using them blindly. Because you still do not understand the logic of the technologies completely. Considerable risks and uncertainties, such as a cyber attack, still exist, according to the report.

Meanwhile, the BDE continues to adhere to their criticisms, especially against non-government cryptocurrencies. For example, central bank director Luis Linde had warned her of the risks in May.

“Crypto currencies are low in acceptability as a means of payment, suffer from extreme volatility, have a variety of vulnerabilities in the business, and are associated with fraudulent and illegal activity.”

Blockchain, on the other hand, is well received by the Spanish authorities. In June, for example, Spanish MPs of the ruling Partido Popular recently launched a bill to suggest that the public administration should use blockchain technology to cut costs. In addition, the government in Madrid plans to lure blockchain companies with tax breaks into the country.

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