Earlier this month, Turkish Central Bank Governor Murat Cetinkaya emphasized that bitcoin could contribute to global financial stability with its decentralized and peer-to-peer (P2P) financial network.
Turkish Central Bank Feels Threatened by Bitcoin
The decentralized structure and nature of bitcoin completely eliminates the necessity of central entities and authorities within the network to settle transactions between two parties. Anyone within the Bitcoin network can freely and seamlessly send and receive transactions without intermediaries.
As such, the research paper of Bank of Finland, described bitcoin as a “marvelous” decentralized financial network, because it operates with its own rules and monopoly by effectively creating a new economy.
“Bitcoin is a monopoly run by a protocol, not by a managing organization. Familiar monopolies are run by managing organizations with discretion to determine and then change prices, offerings and rules. Monopolies are often regulated to prevent or at least mitigate their abuse of power,” the paper of the Bank of Finland read.
Several governments and central banks including the Turkish Central Bank are concerned with the impact bitcoin has imposed on the global finance industry over the past year, and how it could continue to evolve into a premier store of value, eventually overtaking gold and eventually, reserve currencies like the US dollar and Japanese yen.
If bitcoin continues to grow at an exponential rate in terms of daily transaction volume, daily trading volume, user base, infrastructure, and adoption by major financial institutions, bitcoin will inevitably become a major component of the global finance sector and a competitor to both government-issued fiat currencies and central banks.
“Digital currencies pose new risks to central banks, including their control of money supply and price stability, and the transmission of monetary policy, Cetinkaya said. Even so, the Turkish central banker said that digital currencies may be an important element for a cashless economy, and the technologies used can help speed up and make payment systems more efficient,” wrote Eric Lam of Bloomberg, who covered the conference attend by Cetinkaya in Istanbul in early November.
Bitcoin Has Become a Challenge For Central Banks
Bitcoin has become a challenge for many governments and central banks, primarily because it forces the authorities to make one of the two decisions; either adopt bitcoin and be at the forefront of bitcoin development or isolate its economy by rejecting bitcoin.
Various studies including Facebook IQ’s research have demonstrated that over 90 percent of millennials across the globe have lost trust in banks and major financial institutions. Millennials feel disconnected from banks, and believe that the banks do not understand or address their necessities.
Consequently, prominent venture capitalist and A16Z partner Balaji Srinivasan stated that by 2040, millennials will have never known a world without bitcoin.
“By 2040, everyone under 30 will have never known a world without Bitcoin. It may as well be gold. That’s the long-term case for replacement,” said Srinivasan.
With the crackdown on fraudulent activities of commercial banks and the decline of the global fiat currency system, bitcoin is at an optimal position to evolve into the next global currency. The Turkish Central Bank feels threatened by the rapid growth rate of bitcoin, as it could render its existence unnecessary in the long-term.