Cryptocurrency Will Not Replace Currency Issued By Central Banks – Romanian Central Bank Official

News | April 17, 2019 By:

Daniel Daianu, a member of the Romanian National Bank (BNR)’s Administration Council, said that cryptocurrencies won’t replace currency issued by central banks because they won’t be able to fulfil the basic roles of currency.

Local media outlet Business Review reported that Daianu stressed, during a conference on Tuesday, the necessity to be aware of the difference between institutions and the roles they have, and the distinction that must be made between technologies like blockchain and cryptocurrencies.

“In my opinion, these are financial assets, not cryptocurrencies, and they won’t be able to fulfil the basic roles of currency. Currency is always backed by a last-resort lender. In markets, the state is the only possible last-resort lender. When the banking system was saved, it wasn’t crypto banks that were saved. Central banks intervened by issuing base currency, which was followed by non-conventional measures.”

According to Daianu, cryptocurrencies will never be able to substitute the currency issued by a central bank.

“What can happen is for central banks to have a digital currency, but that will also be issued by the bank, and commercial banks will receive digital currency that can multiply,” said Daianu. “I do agree, however, that new technologies lead to disintermediation and this feature of decentralization shows us the merits of networks.”

In February 2018, BNR announced that it discourages any involvement of local credit institutions in the crypto sector because of reputational risks. The central bank reminded of its earlier warning issued in March 2015 on the high risks of losing the money invested in cryptocurrencies. Following this announcement the local banks closed the accounts of several cryptocurrency exchanges.

In July 2018, the country’s finance ministry released a draft Emergency Ordinance, which regulates the issuance of electronic money (e-money). The draft defines electronic money as “monetary value stored electronically, including magnetic, representing a claim on the issuer issued on receipt of funds for the purpose of performing payment transactions and which is accepted by a person other than the issuer of electronic money.”