Cryptocurrencies Are “Too Primitive” for State-Backed E-Franc, Says Central Bank Board Director

  • A Swiss central bank board director has argued that cryptocurrencies and blockchain technology are still "too primitive" for the financial institution to issue an e-franc.
  • Per the director, blockchain technology has potential, but only when it looks very different from what it does today.”

Thomas Moser, a board director at the Swiss National Bank (SNB), the country’s central bank, has recently argued that cryptocurrencies and blockchain technology are “too primitive” for the country to issue a state-backed e-franc, according to local news outlet Swissinfo.

While speaking at the Crypto Valley blockchain conference in Zug, Moser compared blockchain technology in its current form to the “useless innovation” compact discs (CDs) were. The central bank board director noted that the digitization of music only became useful and practical once streaming changed the industry’s landscape through a whole new model.

According to him, cryptocurrencies will see a similar disruption. He said:

Something similar has to happen with bitcoin. People will only switch to something new if it works better or is cheaper.

Thomas Moser

Moser’s comments come a few days after the Bank for International Settlements (BIS) released a report on cryptocurrencies that argued they “promise a lot, but don’t always deliver.” The “bank for central banks” slammed cryptos like bitcoin for several perceived flaws, including the cost of running a Proof-of-Work (PoW) consensus algorithm, and their scalability.

These flaws, per the BIS, make cryptocurrencies unsuitable for a global means of payment. It’s worth noting that the financial institution’s general manager, Agustin Carstens, stated earlier this year that cryptocurrencies became a “combination of a bubble, a Ponzi scheme, and an environmental disaster.”

During the conference, while Moser reportedly dismissed cryptocurrencies, he did note blockchain technology was promising, but only when it “looks very different from what it does today.”

At the same event Swiss Economics Minister Johann Schneider-Ammann stated blockchain technology will “penetrate the economy,” while cautioning against the potential risks of moving too slowly or too quickly.

Last month, as CryptoGlobe reported, Switzerland’s Federal Council requested a study on the risks and benefits of launching its own cryptocurrency, the e-franc. The idea of a state-backed cryptocurrency was initially brought forward by Romeo Lacher, chairman of Swiss stock exchange SIX.

Switzerland is seen as a safe haven for cryptocurrency-related projects. Earlier this year, the country’s financial supervisor, the Financial Market Supervisory Authority (FNMA), published guidelines in support of initial coin offerings (ICOs.)

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Bitcoin Dominance Bump Unlikely to Last — Market Analysis

The entire crypto market seems to be going risk-off and turning to a state of correction, after an excellent start to 2020 throughout January and February which saw significant gains. This is reflected in the brief pop in Bitcoin market dominance. But in the longer term, it’s a different story, and we must always bear in mind the intercourse the conflicting trends of different timeframes – and how they can still agree with each other.

Here, rather than focusing on any specific crypto, we’ll look at the market as a whole using some trusted indicators.

We first look at a small-to-medium-timeframe chart of Bitcoin plus Bitcoin’s market dominance arrayed against the “Others” market dominance, Others being a basket of all altcoins below the top 10. This panoply of charts gives us a broad insight into the whole market.

just some speedbumpsBTC chart by TradingView

During January and some of February, we can see clear risk-taking in the form of a rising altcoin market share. Bitcoin’s price was rising even as its dominance was falling: peak altcoin conditions, where so much buying is coming into the system that more entities are buying Bitcoin than selling Bitcoin for altcoins, even when there is a lot of that.

This pattern has reversed in the past few days, with Bitcoin’s price falling even as its dominance rose, with altcoins being sold back into Bitcoin. The market was overheated in the short term, and people are wisely hedging their profits.

But this trend is unlikely to last. Zooming out and looking at a chart of Ethereum/Bitcoin and both dominance charts again (with Ethereum being a general proxy for the altcoin market), we see a different story.

the bigger picture says the opposite thingETH chart by TradingView

There is a lot going on here. First we can note that Ethereum – again, bearing in mind its role as a general proxy for altcoins – has retaken a very important inflection line that it lost during 2019, the dotted line. It is likely, based on this line retaken last week, that Ethereum is starting a long term uptrend against Bitcoin – and that altcoins in general will do the same in the long term.

Moving to the Bitcoin dominance display in the middle panel, we see an agreement of the above thesis. Bitcoin’s dominance has fallen below its own critical level, namely the area near and above 70%, which BTC held for a while during 2019. This level had not been held since 2017, when Bitcoin put in its all-time-high – and it now looks to be trending steadily away from it again.

This trending away will again provide the space for altcoins to grow in market share, and we have already seen the beginning of this trend during 2020. Perhaps what we have seen was only ‘Round One’.

And moving below to the Others dominance, we see that this indicator has, yet again, taken an important level of 6% and is likely trending away from it. This is the same message in reverse: this level was first tickled during the first real altcoin mega-rally, in the beginning of 2017, and stayed above it for years. It was lost for a time in 2019, about the same time Bitcoin retook its level of 70%.

The larger trends are likely moving in the opposite direction than the shorter ones. Bitcoin's price, based on these indicators, is likely to continue rising even as its market share continues to falls. Altcoins, after years of being battered, are likely to continue gaining market share; and in that situation, the pie can only be getting larger overall.

The views and opinions expressed here do not reflect those of CryptoGlobe.com and do not constitute financial advice. Always do your own research.

Featured Image Credit: Photo via Pixabay.com