Nick Szabo Says Central Banks Could Hold Virtual Currencies and Increase Reserves
The cryptocurrency expert and Bitcoin supporter Nick Szabo believes that central banks could adopt cryptocurrencies to improve their reserve levels. The information was released by Finance Magnates on January 9.
Nick Szabo has been involved in the digital currency space since Bitcoin (BTC) was created. He has also developed the concept of “BtGold” which was a digital currency created in 1998 that was never implemented. At the same time, he also conceptualized smart contracts in 1996.
During an event in Israel, he explained that cryptocurrencies could be viewed as a good alternative to central bank reserve denominations. He has also said that cryptocurrencies could be a solution for the trust problem faced by some banking institutions.
About it, he mentioned:
“There’s going to be some situations where a central bank can’t trust a foreign central bank or government with their bonds for example. One solution that’s been developed is to have the Swiss government hold it for you – that’s not a trust minimised solution. The Swiss government itself is subject to political pressures and so a more trusted minimised solution is cryptocurrency.”
Central banks hold currencies from different countries, gold and other assets. These funds are used to influence monetary policy and help countries stabilize their economies during periods of crisis.
Szabo has also predicted that crypto adoption would rise in countries with economic problems such as Zimbabwe or Venezuela. Both countries do not have a trustworthy fiat currency and individuals tend to perform transactions in foreign currencies or digital assets.
For 2019, Szabo said that the Lightning Network (LN) would continue to be developed and keep growing. Although 2018 was not a good year for digital assets, fundamentals behind Bitcoin (BTC) improved throughout the year.
Back in September, Michael J. Casey, the Chairman of CoinDesk’s advisory board, wrote an article in which he analysed the idea of the Argentinian central bank to purchase Bitcoin. Argentina had a difficult 2018, similar to Turkey. Inflation skyrocketed up to 47% and the dollar devaluated more than 100% against the dollar during 2018.
Casey analyzed the proposal made by the blockchain developer Santiago Siri proposing to the Argentine central bank to put 1% of its reserves in Bitcoin. According to Siri, this would help the bank increase is reserves in the future and adding more diversity to the reserves of the central bank.
At the moment, central banks seem to be far from Bitcoin and other digital assets. However, most of them are already analysing the possibility to launch a Central Bank Digital Currency (CBDC).