Former Reserve Bank of India Governor Raghuram Rajan said private cryptocurrencies like Bitcoin (BTC) and Facebook’s Libra could have a future even if central banks launch their own digital currencies.
Rajan, who was also chief economist and research director of the International Monetary Fund from 2003 to 2006, said on a CNBC broadcast that one of these digital currencies could only become a problem if it had a monopoly.
However, it is anticipated that there will be other private digital currencies that play a different role and offer strong competition for the existing currencies.
The former central banker said that in the future, bitcoin will function primarily as a store of value or a speculative asset rather than a medium of exchange. He added, “Bitcoin is a bit like gold.”
On the contrary, said Rajan, the scale is used in daily transactions.
Rajan also expressed concern about banks issuing digital currencies to central banks. He said banks will be able to obtain a large amount of information through the use of central bank digital currencies, but that people may not be comfortable sharing all of their personal payment information. He added that banks need to specify what data they want to collect and how they want to use it.
Similar to private digital currencies, there will also be a problem if there is a “monopoly central bank digital currency with no guarantee that the central banks will use and manage the currency and related data”.
Rajan said it would be beneficial to compete for both private digital currencies and the central bank.
Rajan concluded that while there are challenges to be solved in the cryptocurrency space, he would like private digital currencies to coexist with central bank digital currencies and find out what works best.