Well-respected University of California Professor of Economics and Political Science Barry Eichengreen has claimed that he favors the use of central bank-issued virtual currencies over decentralized cryptocurrencies. He added that the latter will not play a major part in the future of the financial sector.
In his interview with CNBC, Eichengreen said that the central bank-backed digital currencies will streamline existing financial services, while the decentralized virtual currencies will be utilized in illegal activities that can adversely affect their mainstream adoption.
“I think there is a role for central bank-issued digital currencies, which are a very different thing than crypto, anonymous currencies… The first alternative central bank digital currencies will make transactions more efficient. The second one is a vehicle for money laundering, tax evasion and the like.”
Different views on the digital currencies
Advocates of the decentralized cryptocurrencies claim that the major feature of the true-digital currencies such as Bitcoin and Ethereum is their independence from central banks. They argue that the time to take back control of global financial systems that are supervised by centralized institutions like the Federal Reserve in the US has already arrived.
The advocates believe that central banking institutions impose too much control over cash flows that often led to questionable decisions by bankers. They state that the virtual currencies resolve these issues due to their decentralized feature and scarcity.
Meanwhile, digital currency naysayers like Jamie Dimon of JPMorgan Chase think that the cryptocurrencies are very popular due to their ability to subvert the law for such unlawful purposes as drug dealing, child pornography and money laundering.
However, the central bank-created virtual currencies such as those proposed by Russia and China could result in even tighter control on cash flows. Due to these contrasting views, it is very interesting to see how the virtual currencies will be treated in the near future.