In Scramble To Explain Bitcoin, BIS Unveils “A New Taxonomy Of Money” In Three Charts

New cryptocurrencies are emerging almost daily, and many interested parties are wondering whether central banks should issue their own versions. But what might central bank cryptocurrencies (CBCCs) look like and would they be useful? This feature provides a taxonomy of money that identifies two types of CBCC – retail and wholesale – and differentiates them from other forms of central bank money such as cash and reserves.
– “Central bank cryptocurrencies“, Bank of International Settlements, Sept. 17 2017
In addition to its traditional observations on the state of the global financial system (which today also included a warning that global debt may be underreproted by as much as $14 trillion due to rampant use of FX swaps), in its latest quarterly review, the Bank of International Settlements, takes on cryptocurrencies, and specifically whether central banks should be worried by their exponentially fast propagation, it not quite adoption. Echoing the paradox first voiced by Bundesbank chief Jens Weidmann in June, namely that “digital currencies will make the next crisis worse” by pointing out that digital currencies – whose flow can not be blocked by conventional means – make an instant bank run far more likely, and in creating the conditions for a run on bank deposits lenders would be short of liquidity and struggle to make loans.
‘My personal take on this is that central banks should strive to make existing payment systems more efficient and still faster than they already are – instant payment is the buzzword here,’ the Bundesbank president said at the time, adding that “I am pretty confident that this will reduce most citizens’ interest in digital currencies.’ Ironically, considering the recent all time highs in bitcoin, ethereum and other cryptos and record users on the US Coinbase exchange, would also suggest that citizens faith and confidence in the existing “payment systems”, and thus central banks, is at all time lows.

This post was published at Zero Hedge on Sep 17, 2017.