These Central Banks are Showing Growing Interest in Bitcoin
It is only a month into 2021, and we are already seeing a tremendous upheaval in how the economy operates. After the tumultuous year that is 2020, we continue to experience changes in the distribution and flow of money.
The Face of Finance is Changing
The financial world is in the midst of an unprecedented revolution. Retail investors have banded together to resist hedge funds, using Robinhood to push up the price of GameStop. The sentiment is that this is the start of a great migration of wealth.
It’s this pushback and transfer of wealth that has so many institutions worried, who can do little to stop it. All eyes will be on retail investors — and even more so on cryptocurrencies as decentralized finance takes off.
While central banks have begun research and development on CBDCs, there is tremendous interest in Bitcoin as well. It is now almost a race between pure cryptocurrencies and fiat-based digital currencies. From China to Estonia, the race is heating up — and market enthusiasts will have a lot to consider going forward.
Government Interest in Bitcoin Adoption
Most of the CBDC-focused countries show tentative, if not outright interest in Bitcoin as digital gold. They have grown convinced of the cryptocurrency’s ability to act as a scarce asset, though they shrug off some claims.
For instance, former Canadian Prime Minister Stephen Harper has said that Bitcoin could be a possible reserve currency. Coming from a former head of state, this is a huge statement of validation. However, he doesn’t believe that Bitcoin will overthrow the US Dollar as the global currency.
The US may be lagging behind a bit, much to the worry of some. The Federal Reserve is considering a digital dollar and has so far not made any damning remarks about Bitcoin.
The newly appointed Treasury Secretary Janet Yellen — no friend of the crypto market — has said that cryptocurrencies must be regulated. Recent remarks indicate that Bitcoin could see some use in the country, even if it will be tightly regulated.
But one particular state in the United States, Miami, is seeking to become a hub for cryptocurrency use and entrepreneurship. Miami Mayor Francis Suarez has been driving a lot of publicity, and has met several prominent industry names.
Besides considering investing himself, Suarez is also hoping to allow Miami citizens to pay taxes and fees in Bitcoin. Other states are doing the same, which is helping Bitcoin and crypto gain ground on a state level.
It’s clear that governments are doubling down on Bitcoin as a legitimate asset — which bodes very well for it. But how will this grow alongside the increased efforts of CBDC development?
While Bitcoin Support Grows, So Does CBDC Research and Development
The sheer number of CBDC projects that have begun in the past 24 months is a testament to blockchain’s potential. Banks and governments once derided it, but the biggest economies in the world are now ensuring they aren’t left behind. They are well aware of the consequences of starting late.
While China may be grabbing most of the headlines, other governments are quickly catching up. These include Canada, Japan, Singapore, Estonia, and Iran. Most of these are in the proof-of-concept stage, but the early impressions are that it will likely be implemented
China began this sudden sprint into developing digital currencies, as it has with other emerging technologies. It is easily the most active in development, and the state bank has airdropped the digital yuan on several occasions. The word is that it expects to launch the currency by the end of 2021.
The Bank of Singapore is also making statements that not only suggest CBDC development, but also those supporting Bitcoin. Officials note that the cryptocurrency is highly volatile and has liquidity issues, but the core purpose as digital gold is strong.
Iran has issued comparatively tighter regulation when it comes to cryptocurrencies. The country officially legalized Bitcoin mining in 2019, and has begun to buy Bitcoin from local miners. One major reason for this change is to bypass sanctions imposed by the US government. It is also encouraging mining operations, with the Central Bank of Iran reaping the rewards.
We are on the precipice of a financial revolution, if we aren’t already a long way in. Many countries will surely make the jump into digital currencies, which can have implications for Bitcoin. Despite some of the fear mongering that is present, this is unlikely to shake the #1 asset very much.
It will be interesting to see how Bitcoin and CBDCs grow in tandem. It’s likely that they will both operate distinctly. What we can know for certain, however, is that the growth of one will spur the growth of the other.
What do you think of the recent interest in Bitcoin by governments and central banks? Will it push the market forward in 2021? Let us know what you think in the comments below.