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Blockchain digital currency trend will continue

IMFS Policy Webinar with Harald Uhlig, University of Chicago, on 27 May 2021 focused on digital currencies


The development of the bitcoin price is like a roller coaster ride. After reaching a new high of 60,000 US dollars in April, by the end of May the bitcoin trades at above 30,000 US dollars. Despite such fluctuations, digital currencies currently meet with high interest. In his IMFS Policy Webinar, Prof. Harald Uhlig of the University of Chicago gave an overview about current developments in this area. Since the mysterious inventor of bitcoin, Sakashi Nakamoto, has come up with the concept of a digital curreny in 2008, many more digital currencies have emerged. Ethereum, Tether, Ripple or Litecoin are just a few more names on the list of crypto currencies. Although Facebook had to trim its plans for its blockchain digitial currency Libra and moved from Switzerland to the U.S. to get regulators on board, Uhlig showed himself convinced that this trend will continue. „There will be more players to come. The technology is simple“.

Whereas the European Central Bank is still exploring the possibilities of designing a digital euro, a central bank digital currency (CBDC) has already been put into practive on the Bahamas and in the Eastern Carribean. With the CBDC, Uhlig sees the central banks in a trilemma. „Of the three central bank objectives price stability, financial stability and efficiency, central banks can only achieve two and then have to chose which.“Summing up, Uhlig remained optimistic. In a currency landscape that is changing dramatically, central banks face competition and will have to act. On the other hand, he argued that CBDC offer central banks lots of new tools that ought to be explored. „In the last decade of negative nominal interest rates, central banks were stuck at the zero lower bound. CBDC bring new opportunities to stimulate the economy.“ Overall, Uhlig sees the technology still at an infant stage. „There are lots of technological possibilities but they’re not yet on our fingertips. It’s like when the iPad appeared.“  appeared.“