Tag Archives: Digital money

Should a Central Bank Issue Cryptocurrency?

On Alphaville, Izabella Kaminska asks why a central bank would want to issue cryptocurrency rather than conventional digital currency.

… if anonymity is not the objective of issuing a centrally supervised cryptocurrency, what really is the point of using blockchain or crypto technology? Just issue a conventional digital currency and be done with it. If, on the other hand, anonymity is the objective of issuing a centrally supervised cryptocurrency, how can this be justified by a central bank in light of years of regulatory policy focused on making sure cashflows are more easily tracked and monitored … The idea it should be the central bank unwinding this trend is utterly bizarre.

And:

… the only incentive central banks really have for introducing cryptocurrencies is in performing a giant monetary bait and switch. “Hey guys! We’re offering this amazing anonymous central bank currency which is as strong and stable as the dollar and yet just as anonymous as bitcoin!!! Come, all you illicit users of physical cash, come use our amazing new currency! We swear it’s absolutely anonymous and will never lead to prosecutions. Honest!!”

Her post relates to a recent BIS Quarterly Review article by Morten Bech and Rodney Garratt.

Initial Coin Offerings and the Pecking Order

On Alphaville, Izabella Kaminska comments on the pecking order induced by initial coin offerings (ICOs).

All of this raises an important point about actual shareholder rights within these structures. Say a legally-incorporated institution with actual shareholders dishes out an uncapped amount of tokens promising a share of revenues or dividends via the ICO process. Do shareholders’ rights to those revenue/dividends trump rights of the token holders? And if so, how does that square with the way risk is distributed through these systems? As Unseth notes, more often than not, it’s the token holders taking the bulk of the early concept risk, yet the inferiority of their ranking relative to shareholders kind of sees the latter receiving a free lunch.