"Is it a threat or not ready for new changes?"
Most of the individuals delving deeper into the cryptocurrency market has led to an increase in the use of digital assets, but there are several reasons why central banks are really afraid of the emergence of this cryptocurrency. Among them are:
Decentralized
Crypto works as a decentralized system that operates without a third party such as a central bank. Following that, digital assets have the potential to undermine the traditional monetary system based on centralized control.
Thus, banks will lose the power to control the money movement system in their country's economy.
Lack of regulation
A largely unregulated crypto would make it difficult for central banks to control the use of digital assets and invite greater risk.
Among them is the difficulty in preventing illegal activities such as money laundering and terrorist financing that use crypto because it is harder to track.
Volatile
The volatile movement of crypto means that its value can change in a short time. These things are capable of giving high risk to holders of digital assets and creating instability in the financial system.
Monetary policy will be threatened
The central bank uses monetary policy to control the money supply or influence economic activity by methods such as raising or lowering interest rates.
However, cryptocurrencies that are not subject to central bank control are capable of disrupting the system including making it difficult for central banks to manage the economy more stably.
Loss of control
The central bank is responsible for ensuring the stability of the financial system and the value of the currency. Even so, crypto operating outside of the traditional financial system would erode those controls.
Overall, the central bank may be 'afraid' of crypto as it is not only different from the traditional monetary system but also able to affect financial stability.
Despite this, several central banks are currently in the process of exploring the use of crypto and blockchain technology to improve efficiency including the security of their systems.
