Central Banks Understand Cryptocurrency — And They Want In
From the Federal Reserve to the Bank of Japan, institutions everywhere are exploring the creation of their own digital currency.
Alex Pickard bought his first Bitcoin in 2013. Within a few years, he was all in.
"People were still very skeptical. But I thought I understood it very well," Pickard said.
By 2017, he left his finance job in California to mine Bitcoin full-time in Washington state, where electricity costs were cheap. He spent almost $300,000 to create his own mining center which required using high-powered computers to earn Bitcoins. But less than a year in, he had to close up shop.
"I put such a strain on the grid that basically ten burly northwestern men came to my door and demanded that I turn off all of my machines because I was putting a strain on the grid," Pickard said.
Not long after, the price began to tumble — fully rendering his mining efforts useless. He’s since returned to his job, and holds a much different outlook on Bitcoin today.
"It's deviated so far away from what it initially set out to be," Pickard said.
But there are still plenty of people betting big on crypto. One reason why might be the effort by central banks to create their own.
"Central bank digital currencies are now possible and we’re going to see some of them around the world, and we need to understand whether that’s something that would be a good thing for the people that we serve," said Federal Reserve Chairman Jerome Powell.
It’s not just the Federal Reserve. Central banks in Europe, China, and Japan are also exploring their own digital currencies. And in the Bahamas, the Sand Dollar digital currency already exists.
Investors are embracing central bank adoption, seeing it as a natural progression that brings legitimacy to the often misunderstood world of cryptocurrency.
"I think that regulation is probably a good thing for the space and is inevitable," said Alex Adelman, founder of Lolli.
But it’s supporters maintain a bright future is ahead, whether central banks get on board or not.
"There's fiat currencies that connect the people within a country. Bitcoin connects people that are on the Internet and that has extreme value," Adelman said.
Pickard’s view on Bitcoin has changed, but he does think cryptocurrency in general will remain popular — even if it’s not as decentralized as he once thought it was.
"It's an interesting world that we're headed into with regard to central bank digital currencies and people actually using block chains for their day-to-day transactions, because it really means every single transaction is stored into a permanent database," Pickard said.
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