Can Bitcoin Replace The Role of Central Banks? – BTC Wires

Dec 25, 2018 15:30&nbspUTC

| Updated:

Dec 25, 2018 at 15:30&nbspUTC

By&nbspSwati Kishore

Bitcoin can be defined as a cryptocurrency that uses peer-to-peer technology to operate without the need of a central authority. Its very definition proposes Bitcoin as a lethal force against central banks. So the big question is can Bitcoin replace the role of central banks?

As is with every topic, there are arguments for and against it. Let’s have a look at all of them. But before you do, do read our guide of the pros and cons of Bitcoin to wrap your head around the digital currency.

You may also read: 10 Differences Between Ethereum And Ethereum Classic

Do central banks play a crucial role?

The origins of central banking can be traced in history to the time period of 1401 in Spain.

Central banks helped fund government initiatives as well as wars. The Bank Charter Act passed in England in 1844 refined the concept of central banks by giving them the power to issue currency.

Central banks did, in fact, help stabilize the financial system during the Great Recession of 2007 to 2009. Today’s central banks play key roles such as overseeing payments, ensuring the soundness of the nation’s financial system, maintaining stable prices, etc.

Central banks possess the power to create or destroy money, increase and decrease interest rates, etc, in order to achieve the aforementioned objectives. A simple delete on a digital balance sheet can make money disappear.

However, decreasing the amount of money in circulation can also make it difficult for businesses to borrow money. In turn, this can adversely impact the growth of the economy.

Central Banks can also manipulate economies in various ways to put them on the path of prosperity, however, such efforts are fraught with danger.

For example, low-interest rates can lead to the outflux of wealth. Or a strong national currency makes it difficult to export goods, which can lead to unemployment.

Central Banks are always looking into the future and they endeavor to make such policy changes which achieve are able to objectives of the future.

You may also read: 10 Reasons To Buy Bitcoins In 2018

Or are they unnecessary?

National and global economies are often loaded with complexities. Such complexities can often make it difficult for economies to be managed by central banks. This argument is put forth by the Austrian School of Economics, and it supports the deployment of digital, decentralized currencies such as Bitcoin to circumvent the complex schemes of central banks.

Not to mention, the central banks’ opaque nature, autonomy, as well as monopoly, have always made them the subject of controversy among a certain percentage of the population.

Economists have argued that mistakes made by central banks can have massive ramifications in the lives of citizens. In fact, Ben Bernanke, the Former Chairman of the Federal Reserve has put the blame for the 1929 Great Depression on central bank’s manipulation.

You may also read: 5 Sites To Buy Bitcoin With Debit Card

Conclusion

Even though Bitcoin and other cryptocurrencies have garnered mass interest, central banks still continue to dominate economies through the monopolistic power enshrined in them.

The nonexistent government support and miniscule adoption rates of cryptocurrencies make the fight between central banks and decentralized currencies even harder.

Bitcoin cannot really replace the role of central banks unless governments recognize the currency as a legitimate store of value.

Do you ever wonder if Bitcoin is really decentralized? Do read our article on the same.

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Swati Kishore

Swati has a keen interest in emerging technologies and she loves to write about them. She loves trance and is also interested in the philosophy of life.

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