You might remember Nouriel Roubini “Dr. Doom” from his testimony to Congress, where he called Bitcoin the ‘mother of all scams’ and blockchain the most hyped tech ever. Even after receiving a lot of backlash for his comments, Roubini doesn’t seem to budge as now he has asked central banks to issue their own digital currencies in order to shut down cryptocurrencies.
Central Banks do not Need Blockchain or Cryptos to enter the digital-currency game- Roubini
In the latest article published by The Guardian, Nouriel Roubini also known as “Dr. Doom” has discussed the idea of Central Bank Digital Currencies (CBDCs) and believes they are a better solution for the current banking and financial system as the world moves towards digitization outdating cash. According to him, most fintech innovations that the world is currently using are still connected to traditional banks and none rely on cryptocurrencies or blockchain. Hence CBDC’s too, “won’t need these over-hyped blockchain technologies”.
He also mentions that crypto-fanatics have been trying to convince policymakers that they would need blockchain or crypto to issue CBDC’s and enter the digital-currency game but that is utter nonsense. TO quote him from his article
“Nonetheless, starry-eyed crypto-fanatics have seized on policymakers’ consideration of CBDCs as proof that even central banks need blockchain or crypto to enter the digital-currency game. This is nonsense. If anything, CBDCs would likely replace all private digital payment systems, regardless of whether they are connected to traditional bank accounts or cryptocurrencies”
Roubini also emphasizes that if CBDC were to be issued, it would immediately displace cryptocurrencies, which are not scalable, cheap, secure, or actually decentralized.
The only problem Roubini sees with CBDCs is that they would disrupt the current fractional-reserve system through which commercial banks create money by lending out more than they hold in liquid deposits and if all private bank deposits were to be moved into CBDCs, then traditional banks would need to become “loanable funds intermediaries,”. This would mean that the fractional-reserve banking system would be replaced by a narrow-banking system administered mostly by the central bank which in a way would be a good step to replace a crisis-prone banking system
Roubini believes and concludes that
“In due time, CBDC-based narrow banking and loanable-funds intermediaries could ensure a better and more stable financial system. If the alternatives are a crisis-prone fractional-reserve system and a crypto-dystopia, then we should remain open to the idea.”
With the International Monetary Fund and its managing director, Christine Lagarde, also discussing the idea of Central Bank Digital Currencies, Roubini’s theory seems to make sense. But having Central Bank Digital Currencies without blockchain would defeat the purpose of having digital currencies as things would still be pretty centralized.
What is your view on the idea of Central Bank Digital Currencies- with blockchain or without it? Do let us know your views on the same.