This archive report was first published on 26 August 2019.
On August 26, 2019, the International Monetary Fund (IMF), World Bank, and other traditional fiat custodians began exploring the possibilities of integrating emerging crypto assets into their existing monetary systems.
Specifically, they have been talking about getting central banks across the world to issue their own version of cryptocurrencies - a central bank cryptocurrency (CBC).
However, at a philosophical level, a CBC seems to be a contradictory of terms since by definition, a cryptocurrency is not supposed to be issued or controlled by a centralised intermediary or agency.
Bitcoin and other cryptocurrencies are by design, anything and everything that central banks are not. They are decentralised; they are purely virtual, and are issued into the economy through competition.
Central banks, on the other hand, are highly centralised, mostly cash-based and issued into the economy according to whatever monetary policy the central bank adopts.
While the global record-keeping system for fiat or traditional money is highly restricted and visible only to the intermediary banks facilitating exchange between the market participants, cryptocurrencies have a global record-keeping system that is visible and distributed across the market participants in a peer-to-peer fashion.
With a blockchain system between central banks and commercial banks, the regulatory or oversight role would be much more transparent than it is for now.
Finally, with respect to how money is issued into the economy, fiat or traditional systems depend on the monetary policy as issued by the Central Bank bureaucrats.
For cryptocurrencies, the monetary policy is pre-determined and hard-wired into the software and cannot be changed according the whims of the Central Bank.
It is debatable if this is a good monetary policy, but what is settled is that at least all market participants get into the monetary system knowing the future schedule of the currency and can plan accordingly.
As an example, the Bitcoin cryptocurrency has an all time supply of only 21 million bitcoins. Nothing more, nothing less.
Traditional currency on the other hand, has a supply volume that is unpredictable and can rise or fall according to the whims of the respective central bank.
Mr Walubengo is a lecturer at Multimedia University of Kenya, Faculty of Computing and IT. Email:, Twitter: @Jwalu
