With the constant discussion of nations and central banks issuing their own cryptocurrencies, Russian President, Vladimir Putin recently dissipated any rumor by clarifying that,

“digital currencies are a phenomenon that is just developing”

Putin added that,

“Russia can not have their own cryptocurrency, just as no other territory should have it, because when we speak of digital currencies, this is because it is an
issue that goes beyond the borders of the nation and not inherent in our
jurisdiction. […] The Central Bank believes that cryptocurrencies can not be means of payment and liquidation, can not be a means of accumulation and are not guaranteed by anything. That is why our approach must be cautious during this period. “

Although not entirely wrong, considering the measures that are evaluated, and which
will be imposed by international bodies, such as the European Union, for example.  However, the comments contradict all of the announcements that took place in October
2017 and January 2018, in which Putin himself, ordered that the Ministry of Finance to
establish measures for the launch, exchange, investments and storage of cryptocurrencies in the Russian territory.

In spite of everything, there is no doubt that, although there is some uncertainty and
opinions that contradict, for the authorities in Russia, cryptocurrencies are a “phenomenon” that could contribute to the development and growth of different sectors of the country in the future.

by Samuel Paz

     According to the Deputy of the Bank of Italy: government cryptocurrencies could save the EU up to € 76 billion.

Fabio Panetta, Deputy Director of the Bank of Italy, gave an opening speech
focused on the digital currencies of the central bank (CBDC) at the conference of
the SUERF / BAFFI CAREFIN Center in Milan on Thursday, June 7th.

Unlike traditional cryptocurrencies, “a liability that does not belong to anyone,” the deputy
governor emphasized from the beginning that a CBDC would be a central bank liability, backed by its assets. By first addressing CBDCs as a possible means of payment, Panetta considered their advantages as “at best, unclear” compared to the existing digital payment
mechanisms offered by the private sector.

Where Panetta saw a key potential justification for the issuance of the CBDC, was to reduce costs in production, transportation and cash disposal. He cited estimates that these costs amount to about half a percentage point of GDP in the EU annually, around € 76 billion, a figure equivalent to almost half of the EU’s annual budget.

Panetta added that if combined with distributed ledger technology (DLT), the potential cost efficiency gains of a CBDC could be even more significant. Considering the potential use of CBDCs as a store of value, Panetta noted that in addition to virtually zero storage costs, a CBDC could function as an asset with “unique characteristics”, without credit and liquidity risks. As such, it could be preferred to other means of wealth storage, including bank deposits.

Panetta clarified concerns that a change in bank deposits to a CBDC wouldn’t necessarily threaten the financial system as a whole. Although it could squeeze the return on the net interest margin (NIM) that supports the credit models of the banks.

Instead, Panetta stressed that CBDCs could innovate existing operational frameworks and push the market towards a “narrow banking model” that would need to be considered again. Panetta significantly increased traceability and privacy – “probably the most important issue” – related to CBDC, as a “political” issue for society as a whole, beyond the exclusive domain of central banks.

Last month, the Bank of England issued two staff working documents dedicated to the issue of CBDCs. The first presented several risk analyzes for CBDCs, and found that there was no reason to believe that the introduction of a CBDC would have adverse effects on private credit or the total provision of liquidity to the economy.

The second document suggested, like Panetta, that the adoption of CBDCs could pose a threat of competition for commercial banks, echoing a March report from the Bank for International Settlements (BIS) that also suggests that “in times of financial stress”, national investors are likely to consider the attractiveness of CBDCs in relation to bank deposits, with many possible side effects for financial stability.

by Emanuel Andrade