Murat Cetinkaya, the governor of Turkish Central Bank emphasized earlier this month that Bitcoin has a great role to play in shaping the stability of the global financial system with its peer-to-peer and decentralized financial network. This basic nature of Bitcoin does not make it necessary to rely on any central authority for fostering the transactions entered into within the network. Transactions can be seamlessly settled without any central authority having to look after the same. The research paper published by Bank of Finland, had described Bitcoin to be a “marvelous” decentralized financial network which operates on its own rules and believes in monopoly virtues. In this way Bitcoin can very well create a new economy pretty soon.
The paper published by the Bank of Finland stated that:
“Bitcoin is a monopoly run by a protocol, not by a managing organization. Familiar monopolies are run by managing organizations with discretion to determine and then change prices, offerings and rules. Monopolies are often regulated to prevent or at least mitigate their abuse of power.”
Central banks and governments worldwide have for long ignored the Bitcoin phenomenon but given its recent growth trajectory they simply can’t shy away from the same. Some of such regulators even feel that Bitcoin houses the tremendous potential of dethroning gold and reserve currencies such as Japanese yen and US dollar eventually to become the penultimate store of value. If the present growth momentum of Bitcoin maintains its stride in days to come in terms of infrastructure, user base, trading volume, transaction volume and adoption by big financial bodies, then nothing can stop Bitcoin from posing as a big threat to the government backed fiat-currencies issued by central banks.
“Digital currencies pose new risks to central banks, including their control of money supply and price stability, and the transmission of monetary policy, Cetinkaya said. Even so, the Turkish central banker said that digital currencies may be an important element for a cashless economy, and the technologies used can help speed up and make payment systems more efficient,” penned down Eric Lam of Bloomberg, who had covered the news conference which was attend by Cetinkaya during early November in Istanbul.
Bitcoin is slowly posing a great challenge to central banks and government bodies as it is making them come face to face with either of the two alternatives – either to accept it and grow along with its wave or reject it and isolate the related economy in return.
Studies such as Facebook IQ’s research revealed that 90% millennials worldwide have lost their trust in these supreme banking and financial institutions. They feel disconnected and think that banks cannot understand their necessities.
Balaji Srinivasan, a prominent venture capitalist and partner at A16Z pointed out that the Bitcoin phenomenon will soon take up a magnanimous form with everyone treating it as the sole mode of financial operations. He was quoted as saying that,
“By 2040, everyone under 30 will have never known a world without Bitcoin. It may as well be gold. That’s the long-term case for replacement.”
Bitcoin has every chance of emerging as the next big global currency given the crackdown of fraudulent activities entered into by commercial banks as well as the downfall of global fiat currency system. In such a scenario its very obvious for the central bank of Turkey to feel threatened as going with its flow, Bitcoin may soon dethrone it to gain the top slot as the supreme financial authority.
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Tarunima Ghosh Laha is a Finance Post Grad from St. Xaviers who believes Finance is more than just Balance Sheets and Ledger creation. This filmy bookworm who believes she was a sloth in past life also nourishes a penchant of owning a private zoo someday. Equipped with a laptop and online Lexicon she is all set to give finance a glamorous makeover in the form of exciting writeups with bang on info and flashy new words.
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