Researchers are warning central banks to preserve the financial systems as cryptocurrencies are ready to overtake them. The British economic historian and author Niall Ferguson recently talked to the Bank of England and suggested that bitcoin is the future of the financial system.
One of the most noted commentators on finance and author of fifteen books including ‘The House of Rothschild’ ad ‘The Ascent of Money’, he talked to the BoE at an seminar on Tuesday. While talking about the 2008 financial crisis, looking back at 10 years of the aftermath of the problem, he suggested that crypto currencies are a part of major challenges for the current system.
In his speech, he mentioned, “The financial system of today is not fundamentally that different than the financial system of the pre-crisis period, except that big banks are better capitalized. I don’t think much else is really different. The novelties, the things that will really matter ten years hence are still relatively small in scale. Whether its bitcoin or cryptocurrency generally or the massive revolution in online payments that is being achieved by the big Chinese tech companies, that’s the financial system of the future, and it is still small enough not to be systemically important in 2018. In short, I am left feeling we are only a matter of time before the next crisis.”
He specifically noted about the problem of Initial Coin Offerings or ICOs in December 2017. He made a surprising statement at the time, suggesting, “At some point, no doubt, regulatory changes in the US will deflate the current bitcoin bubble. But they will not halt, much less undo, this financial revolution. Think about it this way. The maximum number of bitcoins that can be created is 21m. The number of millionaires in the world, according to Credit Suisse, is 36m. Their total wealth is $128.7 trillion. If millionaires collectively decided to hold just 1% of their wealth as bitcoin, the price would be not $15,000 but north of $60,000. If they raised that to 5%, the right price for bitcoin would be above $300,000. I am not saying this is certain to happen. I’m just saying my teenage son thinks it could.”
He had a lot of things to say about the emerging digital coins market. In fact, he suggests that he wishes he got a bitcoin for every phony white paper he was ever shown in the last six months. Professor Robert Shiller also supported his views. The Nobel Prize winner suggests that the allure of the cryptocurrencies helps in reinventing the concept of money.
The cryptocurrency sector is becoming increasingly mainstream and several people are now attempting to ensure that it fits the definition of traditional money. However, the blockchain revolution doesn’t conform to already existing standards in fiat. It is because of this that most central banks appear bewildered at the very existence of a currency that doesn’t have boundaries, a centralized management or even the identity of the creator. While these banks are experimenting with blockchain tech, they are universally against cryptocurrencies.
