Cryptocurrencies are excluded from the trust system that fiat has used to flourish, Taiwan’s central bank governor Yang Chin-long said during a forum on the bank’s role in the digital economy.
He clarified this further by saying that fiat currencies as a payment method have historically been backed up by a system of trust. Once this trust is gone, the same thing happens to the value of the currency, according to Yang.
The governor added that cryptocurrencies lack this foundation due to their predisposition to volatility and they have a certain appeal to wrongdoers because there is no recourse for those who suffer losses due to theft.
The fact that most cryptocurrencies’ blockchains are trustless and permissionless actually provides a certain amount of appeal. Investors can trust technology without having to trust institutions, in theory.
However, it is worth noting that Bitcoin has only been around for a little less than a decade. We have no truly long-term testament for its reliability as a global currency, nor is there a guarantee that it will still be the go-to cryptocurrency in another decade.
Nonetheless, this is the first time in history that a capital market competes on a truly global scale against fiat currencies and actually has a chance to be a strong contender.
Yang’s statements reveal more about his opinion on cryptocurrencies than what we got in March when he said that cryptocurrencies are not worthy of being called payment tools.
This time, however, the words come at a time when the country is working towards drafting more cryptocurrency legislation. Anything that the governor says could influence the decisions the country makes as it begins to form a legal framework for digital currencies.
Although Taiwan might not take as harsh an approach as China did, the nation’s recent worries on money laundering may spill over into its legislative body’s discussions when drafting future laws.