Central Banks “Defending their Own Monopoly” with Govt Backed Crypto while Driving Bitcoin’s Demand
- Bitcoin and digital currency purchase soar in China
- Central banks are, in fact, driving the demand for Bitcoin
- With economic growth slowing down and central banks preparing for QE, we’ll come to see if Bitcoin is really a safe haven asset
“Only a central bank is allowed to issue base money,” the chief Asia economist for one major international bank told Nikkei.
So, when money printers go harsh on digital currencies, “They are defending their own monopoly,” he said.
We have seen how People’s Bank of China has been uncertain about digital currencies but at the same time it crackdown hard on cryptocurrency exchanges.
Not just China, the central banks around the world are cautious about crypto asset while parallelly focusing on creating their own government-backed digital currency.
From China, Sweden, Singapore, Canada, the Bahamas, to Iran, Thailand, Uruguay, and India, central banks have advanced their cryptocurrency projects.
Bitcoin and Digital Currency Purchase soar in China
In the last few months, Nikkei reported the volume of Bitcoin and other cryptocurrency purchases in China has soared, with one expert at the informal Bitcoin association of China saying the increase has been of 50%.
During these times, thousands took part in Hong Kong anti-extradition protest, “fighting for a just and fair society. We also saw Chinese Yuan fell below the important physiological level of 7 against the US Dollar.
Recently, it has been revealed that after five years of research, its central bank-backed digital currency is getting ready for the launch.
Government's commitment and urgency stemmed from the concern about the capital flight as in the first quarter, the errors and omission deficit — that can be largely attributed to capital outflows — increased to about $88 billion.
Now, the country is trying to stop the outflows and cryptocurrency is one of the main channels of such outflows.
“Because of their fear of capital outflows, the Chinese see every financial asset as the enemy,” said one senior official at the Bank of Japan. “But we don't worry about outflows. We are in love with the technology behind it and we are in touch with the technology community.”
Central banks are, in fact, driving the demand for Bitcoin
Earlier this month, we saw Bitcoin rallying when PBoC let its currency fall freely.
Currency devaluation is the tool used by central banks in the name of stimulating growth. They have also taken up to pushing the interest rates into negative. Recently, we also witness a string of central banks shocking the market with the rate cuts.
When the Fed holds an annual meeting in Jackson Hole, Wyoming this week, to be attended by the central bankers, most analysts are expecting even more dovish talks with dovish actions to follow.
This would be the first time Fed Chairman Jerome Powell will speak after the July FOMC meeting, after which he announced the first rate cut in over a decade. However, things didn't go well because the stock market plummeted and the President tweeted his disapproval.
Meanwhile, Bitcoin has emerged as a safe haven asset this year amidst global chaos where negative interest rates, easing monetary policy, trade wars, and geopolitical tensions are shaking the system.