Crypto pioneer Nick Szabo: Central banks could use the cryptos to secure reserves
Nick Szabo, the pioneer of cryptocurrency, has argued that central banks could soon resort to cryptocurrency to secure their reserves, reports the Finance Magnates on January 9.
Szabo is a veteran cryptographer who has developed the concept of “BitGold”, a digital currency prior toBitcoin (BTC), focused on privacy, which was never implemented in 1998. It is also the first to have conceptualized smart contracts, in 1996 much before the momentum in the entire sector and remains a leading thinker in the cryptosphere.
In his comments after his presentation at the Israel Bitcoin Summit at the Tel Aviv University on Tuesday, Szabo proposed that in 2019, in a context of increasing global geopolitical uncertainty, cryptocurrencies can increasingly be seen as a solid alternative to the existing reserve denominations of central banks, arguing that:
“There are going to be some situations where, for example, a central bank can not trust acentral bank or foreign government with its bonds.” One solution that hasbeen developed is to have the Swiss government keep it for you; It is asolution that minimizes confidence, the Swiss government itself is subject topolitical pressure, so a solution that minimizes confidence is cryptocurrency.”
The reserves of central banks that may beholdings of national or foreign fiduciary currencies, or other international reserve assets, such as special drawing rights (SDRs), government bonds orcompany shares, are an integral bulwark of the existing financial system. andthey are used to support liabilities, provide a pillar against economic riskand to influence monetary policy.
Szabo pointed in particular to physical gold as vulnerable, citing the historical precedent of the looting of the gold reserves of Europe by the Nazis, beginning with that of Austria in 1938.
In other observations, Szabo predicted that crypto-adoption would increase in countries where economic mismanagement has precipitated the ruinous devaluation of the national currency and / or inflation, as well as in politically isolated states subject to the pressure of international sanctions. Regarding the current state of technological development in the cryptos sector, Szabo anticipates that in 2019 there will be a greater adoption of second layer solutions, such as the Lightning Network.
According to Cointelegraph’s correspondent on the spot, Szabo’s comments were precipitated by a divisive opening speech by Avi Simhon, head of Israel’s National Economic Council and senior economic policy adviser to the country’s prime minister.
As reported on Tuesday, the economist had opened the Israel Bitcoin Summit denouncing Bitcoin as intrinsically inefficient, predicting the demise of the cryptocurrency.
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