Russia’s central bank proposes multi-national BRICS cryptocurrency
Official multinational cryptocurrencies make sense in some ways, but might fall down in the long run.
The Central Bank of Russia (CBR) has proposed a plan to discuss the creation of a supra-national cryptocurrency for the entire BRICS (Brazil, Russia, India, China, South Africa) and EEU (Belarus, Kazakhstan, Kyrgyzstan, Russia), according to Bloomberg.
Cautionary note: The original source is an RT article.
At a time when countries around the world are developing their own cryptocurrencies or simply trying to find a way of stamping out the latter, the CBR might have a point.
"The participants of different economic events where I usually take part… all come to the conclusion the issue of a virtual currency is not needed much by one country. First of all, it makes sense to discuss the cryptocurrency on the level of several countries such as BRICS and EEU. It makes sense to set one equivalent for all payments," CBR First Deputy Governor Olga Skorobogatova said at a finance ministry meeting. "The introduction of a national digital currency seems to us not entirely justified."
The merits of multinational cryptocurrency
One of the main benefits of cryptocurrencies might be for international transfers, where the existing networks could be aptly described as "unacceptable."
The need for a settlement layer to consistently bridge different currencies is an ongoing problem. Traditionally, this has been done with the US dollar, and international transfers will often involve converting the initial currency to the US dollar and then to the recipient currency rather than converting it directly.
In September, the chief of the Russian Direct Investment Fund Kirill Dmitriev said the BRICS finance committee was discussing the merits of a joint digital currency for the five nations of the bloc, specifically the potential for a BRICS currency to replace the US dollar as a settlement layer. This follows news of ongoing plans to implement the Chinese yuan as a US dollar replacement for BRICS transactions.
Cryptocurrencies might be especially useful at this layer if they get traction and regulatory support. Ripple XRP and Stellar Lumens XLM are both aiming to become this intermediary currency. One of the main question marks hanging over the head of Stellar and Ripple is their acceptance by governments and national banks. Official government digital currencies might be their main competition.
Official multinational cryptocurrencies might make a lot of technological, economic and political sense, but in the long term, they might not be the ideal option. Cryptocurrency bridging mechanisms are developing quickly, and it's also possible that the future will become a series of national digital currencies, built across shared standards for seamless compatibility and the integration of a wide range of features.
Different countries might be able to tailor their own currencies to meet their own needs, without compromising their interchangeability with other currencies and without ceding too much economic control to others.
This might be a more likely outcome than shared multinational cryptocurrencies.
On the other hand, mutual mistrust and political and economic complexities will almost certainly get in the way of this. But on the other hand, that might be the perfect application for trustless and appropriately decentralised blockchain solutions.
Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VEN, XLM, XRB and SALT