Just last year, it seemed that national cryptocurrencies were on their way. With the value of bitcoin skyrocketing, blockchain-based cash was seen as the future of money. However, as bitcoin fell 70 per cent in value this year, the Federal is abandoning the idea of the “Fedcoin”—a theoretical blockchain-based substitute for the dollar.
According to Aleksander Berentsen and Fabian Schar, researchers at the St. Louis Fed, “[T]he key characteristics of cryptocurrencies are a red flag for central banks.”
Therefore, even though central banks could easily start their own cryptocurrencies, the idea is in limbo.
“Cryptocurrency is still a very young technology and there are large operational risks,” Berentsen and Schar said. “Overall, we believe that the call for a ‘Fedcoin’ or any other central bank cryptocurrency is somewhat naïve.”
Better luck next year!