Former IMF Chief Economist Raghuram Rajan sees digital currencies Bitcoin and Libra enjoying a better function within the monetary system as soon as central banks develop into concerned.
In a Past the Valley interview with Arjhun Kharpal, Rajan says Bitcoin and Fb’s Libra may each present totally different capabilities in the way forward for the monetary system, when central banks world wide hop on the digital foreign money bandwagon.
“So the bottom line I think is different private currencies will do different things and it may be Bitcoin has value going forward just as a store of value, or as a speculative asset, while Libra may be the kind of currency which is used more for transacting.”
The previous governor of the Reserve Bank of India likens Bitcoin to gold however says the value of the king crypto is principally derived from hypothesis.
“In that sense, bitcoin is a little bit like gold, in fact, gold has some value because we value it for jewelry, but bitcoin you can’t even do that. Nevertheless, it has value because others think it has value.”
In the meantime, Rajan believes Libra may serve a much bigger function within the eyes of central banks.
“Libra is an try to create a foreign money which is used for transacting. And that, the entire thought is to not maintain it as a speculative asset which will increase in value … however use it for transactions. So the final word underlying value goes to be from the central banks, they’re going to protect the value, not of Libra however of what Libra might be exchanged into.”