The editors of Bloomberg say that central banks should tread carefully with cryptos in the article titled Bitcoin isn’t the future of money that is attributed to the Editors of Bloomberg. The article is meandering and really didn’t make any sense to me. But my take on the issue is that whatever CB’s decide to do, there are at least two reasons why central banks should not do cryptos.
But first, let’s think about what cryptos are currently. Generally, they are serialized and encrypted digital timestamps that are created by the each through a complex algorithm with a blockchain transaction log behind it so that they can be validated later. That’s it. Digitized and encrypted Monopoly money that is assumed to have capped quantity and can be validated as genuine Monopoly money as if all of the pains taken to create it produce some sort of value. Why they are apparently so valuable is a mystery to me. Nobody seems to want to offer anything in trade for the pack of play money that can be bought at the toy store, but take a digital version of it that is created by math and all of a sudden it’s worth tens of thousands. Go figure.
So I think the question is: why would central banks WANT to do cryptos?
Central banks already have fiat currencies that are legal tender to work with and you can’t “print” cryptos or add a bunch of zeros to an account(s) if the need arises. With the electricity it takes to mine cryptos, never mind who would be able to mine the cryptos sponsored by a central bank (moral hazard?), it would be wasteful for no real good purpose when one dollar or one euro should be the same as the next. I suppose it may work well if they are interested in sponsoring rather rewarding Easter egg hunts. But other than that, the technology behind cryptos doesn’t bring anything new to table that central banks would need while also adding limiting features that many of them may have legal problems with. At least the Fed doesn’t have the authority to set legal tender; and making the dollar a crypto would be a kin to putting us back on the gold standard = can’t do it. It would certainly be bold and out on the edge politically for the Fed to try it.