In a real sense, central banks are there to oversee, moderate, and regulate a country's financial stability and systems, most especially outside the market. Their purpose is best described as the manhole of the money dispenser. It is governed by the governor, who sees things and makes regulations across the country.
At a time, I kept wondering why central banks must have an impact on cryptocurrency and also what would have joined central banks with cryptocurrencies, but after making some findings, I came to conclusions knowing the real reasons for the impaction. It's no child's play with the impacts of central banks on cryptocurrency. I discovered so many things and secrets that everyone would love to know related to the impact of central banks on cryptocurrency.
The central bank has been doing so well and so great, but with the evolution of cryptocurrencies, the board had to sit down just to address the risks and benefits involved with the digital currency.
Amongst all, these roles are the ones I could be able to let out as to the way I understand them.
Creation of a regulatory framework
Before creating the regulatory framework, the central bank has to understand the working process of cryptocurrencies as well as all that concerns them in terms of blockchain and smart contracts. The system must be understood to the best of the central bank before creating a regulatory framework. The cryptocurrency process is not an easy one, but this is the only way they can use it before starting off.
No crypto business is without risks, so the central bank has to know the risks associated with cryptocurrency. They also have to know the different crimes involved with cryptocurrency trading and fraudulent acts.
Knowing the types of risks involved does not mean you have tackled the problems. As we all know, the central bank is not a security agency, nor are they tax regulatory agencies, but they must work hand in hand with these agencies if they want to achieve their aims.
Security or funds, frauds, and other cyber acts may be prevented by the regulation that would be passed by the central bank. This would be achieved after registering your crypto wallet with the central bank. This means consumers may, at least to some extent, be safe from these acts.
The KYC done by most cryptocurrency wallets is within the scope of the central banks, as the medium used is just to know your consumer. This process would involve the use of a national identity card or any other means of identifying you as a consumer.
There are so many regulations the central banks may give regarding the use of cryptocurrency aside from the few stated above.
Influencing and stabilizing cryptocurrency
It's the role of the central bank to influence the value of cryptocurrencies. For instance, inflation can be managed by the central bank by stabilizing the interest rate or open market utility, which would be used to support economic growth. They may even have the chance to manipulate the price or stabilize the cryptocurrency crisis.
Central banks can generally work together to bring about some crucial talk related to cryptocurrency advances in the financial global system, just to understand the risks involved in the system.
They also work together to set up measures to prevent money laundering and any other illegal financing.
In another way, they can ensure some urgent measures in regulating cryptocurrencies generally by collaborating with the organization agency.
They serve as a yardstick to change the use of blockchain technology and cryptocurrency through collaboration with stakeholders and other crypto governing bodies.
Posted Using InLeo Alpha