One Wall Street exec thinks cryptocurrencies like bitcoin could pose a big enough threat to central financial systems that governments will issue digital currencies of their own.
“I don’t think governments are going to take lightly other people coming in and potentially disrupting their abilities around data, around tax collection, around money laundering, around know-your-customer,” said Citigroup CEO Michael Corbat in an interview with Bloomberg on Wednesday. “It’s likely that we’re going to see governments introduce, not cryptocurrencies—I think cryptocurrency is a bad moniker for that—but a digital currency.”
That may seem like a fresh perspective from an industry that has resisted recognizing bitcoin as a currency even as it has surpassed the $7,000 mark, however, world leaders are already making plans to launch their own digital currencies.
In October, Russian president Vladimir Putin called for a state-issued cryptocurrency, the cryptoruble, in a closed-door meeting with Moscow’s political elite. A senior government official said that the cryptoruble will be developed and issued quickly by the Russian state, and that the government would not allow mining of the digital currency.
And before that, China announced this past summer that it had developed a prototype of a cryptocurrency that could end up in circulation in the near future. The country has cracked down on trading bitcoin in recent months, and is now simulating possible scenarios and running mock transactions using their digital prototype with some Chinese banks.’
The potential benefits of a country developing its own digital currency are significant as it would decrease the cost of transactions making financial services more accessible, it would be supported by the blockchain technology which has the potential to decrease the rate of fraud and counterfeiting, and it would make currency easier to obtain which would increase the rate of international transactions, which in turn would allow for more trades and faster economic growth for countries like China and Russia.
As more major economic powers adopt their own digital currencies, we could see an end to bitcoin and decentralized cryptocurrencies as we know them as countries crack down on their trading to force their citizens to participate in state-sponsored digital tokens.