Central banks have expressed keen interest in creating their own cryptocurrencies, probably in realization that blockchain-powered assets are more than just a fad. It’s too bad they lack the paradigm to do so, says Ethereum founder Vitalik Buterin.
Vitalik Doesn’t Think They Can Do It
A central bank-backed cryptocurrency would simply amount to “a server and a bunch of marketing buzzwords to make it look like a blockchain,” says Buterin, according to Jeff John Roberts’ latest Fortune report.
The 23-year-old Buterin said it would take years for central banks to mint their own coins, suggesting that existing blockchains needn’t be worried about competition from government.
Indeed, central bankers have spent the past few years mulling over the impact of cryptocurrencies on traditional payment methods. It’ll be another few years before they develop a system comparable to bitcoin or Ethereum, if at all.
Russia could become the first case study in government-backed cryptocurrency. Reports from TASS suggest that central regulators are embarking on a ‘CryptoRuble’, or a digital currency system backed by fiat money.
Buterin is a native of Russia, but currently resides (at least partially) outside Toronto. That may explain his recent visit to the three-day Swell conference in the city. The event was hosted by Ripple, the world’s third-largest digital asset by market cap.
Can Governments Contain Cryptocurrency?
Buterin has raised awareness of the irony in proclaiming a centrally-controlled cryptocurrency. By definition, a cryptocurrency cannot be contained within a single jurisdiction, since mining can carried out by anyone, anywhere. This is perhaps what’s making central bankers so nervous. Although Russia’s CryptoRuble aims to centralize the mining of cryptocurrency, it’s unclear how such a system would be administered.
The inherent tension between central banks and cryptocurrencies will likely grow over time as more people use digital tokens as payment. With the exception of bitcoin, cryptocurrency has yet to take off as a payment method. Japan could very well be the first case study in how quickly bitcoin will be adopted to pay for goods and services. The world’s third-largest economy has already recognized cryptocurrency as a legal payment method, leading to speculation that hundreds of thousands of domestic merchants will start accepting payments within the first year.
Featured image courtesy of Shutterstock.
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