Marius Jurgilas, board member at Bank of Lithuania echoed a sentiment that many banks and financial institutions have felt in the recent months since cryptocurrencies have emerged as a viable new asset class:
“If society starts questioning whether we are providing a good product, that is how cryptocurrency will grow” -Jurgilas (Bank of Lithuania).
Tweeted by crypto influencer and CEO of Shapeshift, Erik Voorhees, the comment demonstrates how central banks finally have to assess their currencies as products in a competitive marketplace.
For hundreds of years central banks have held a monopoly on the issuance of currency and the dictation of monetary policy.
This unchallenged control has led to an economic crises, as well as significant financial inequality. Large populations of the world still remain unbanked due to an unrealistic criteria set by these institutions in order to gain access to capital.
As more people begin to discover cryptocurrencies, they’re recognizing the value in being able to make secure transactions peer-to-peer, as well as the ability to choose whatever coin they wish to transact with depending on their particular needs (privacy, security, speed, etc).
People can also rely on these currencies to not become inflated, as supply is capped from the moment a new token is launched. Furthermore, any major changes made to a cryptocurrency are decided by consensus, as opposed to by some central authority. Banks will now have to adjust to the idea that their Fiat money is simply one of many forms of ‘money’ in the marketplace, and that a central authority dictating monetary policy can actually become a competitive disadvantage.
Fortunately, the Bank of Lithuania is already making moves to ensure that they can keep up with the value being offered by competitors in the crypto space.
On April 15, the Bank initiated a dialogue between commercial banks and virtual currency traders on their attitudes toward cryptocurrencies. Jekaterina Govina, fintech strategy coordinator at the Bank of Lithuania has been quoted as saying that despite the risks, “blind denial, reluctance to understand and to work with the cryptocurrency world leads nowhere”.
The Central Bank is making an effort to work with ICO companies and explore ways in which regulatory compliant startups can store some of their ICO funds in traditional banks.
Lithuania has been a focal point for crypto investing, with projects from the small European nation attracting more than 10 percent of all ICO investments in 2017. As long as the Bank of Lithuania continues to learn and adapt to the crypto markets, they should achieve their stated goal of becoming a prominent northern European fin-tech hub.