Posted 2 years ago | by Ben Armstrong
ING Economist Predicts Central Banks Will Introduce Tokens Soon
ING, a major Dutch bank, has released a video that features its chief economist predicting that Central Banks will create tokens over the next 2 to 3 years. Mark Cliffemight, who made the prediction, thinks that in the wake of Facebook's Libra announcement, it is only a matter of time before central banks decide to create tokens that could work alongside of fiat currency, or even replace it.
Cliffemight commented that:
“I think we’ve already got some sense of urgency amongst the policy community...(and central bank tokens would allow a) move even further into negative territory with interest rates.”
The Libra project drew attention from many disparate groups, including the highest levels of the US Government. Opinions on Libra are mixed, but many in the government expressed concern over the token project.
Facebook's token isn't the same kind of asset that Bitcoin is, and it is highly centralized by comparison. It may not enjoy the same amount of support from the existing crypto community, although it may be used as a model by central banks.
The Zero Tokens
It is interesting to note that Cliffemight made the connection between digital assets, and the rising need for central banks to deal with the massive amount of debt that has flowed into the global economy over the last 25 years.
Most people are familiar with how interest rates work, and that when a person borrows money, more will have to be paid back. In the world of negative interest rates, the exact opposite is true. Lenders pay to loan money, and debtors pay back less than they borrow.
At the moment, there is more than $18 trillion USD worth of negative yielding debt in the marketplace right now, with the vast majority of it comprised of G7 government bonds. The problem for central bankers is that cash as it exists today can't be forced into a zero or negative interest rate regime.
A Popular Option?
Cash exists as a direct representation of what denominates government debt, and can't be easily devalued against itself.
The downside of physical currency makes a central bank digital currency a much better option for the major central banks, as depositors would have no choice but to accept a means of savings that would fall in value (savers would have to pay for bank deposits) as interest rates dive further into negative territory.
Central Banks could use digital tokens to help mitigate the fallout from a monetary experiment that is without precedence in recorded history. Whether or not the public will accept central bank tokens in the same way that it has accepted fiat currency since 1971 is another question.