Bitmain's Jihan Wu: What are the possibilities for a private central bank based on blockchain?

This article is compiled from the speech delivered by Bitmain founder Jihan Wu at the Washington Blockchain Summit on March 8, 2018, and is sourced from Jianshu author JChenjunjie.

“One question we need to ask is if there is a market for private central banks…will there be too many currencies?”

We need to ask a question: if there are multiple private central banks in the market, will that create too much money?

Hayek once reasoned that rather than allowing an uncontrollable array of currencies to emerge, the market would eventually converge on one or a limited number of monetary standards, upon which other institutions could issue notes.

In what dimensions do digital currencies compete?

1. Security; 2. Legality; 3. Privacy; 4. Decentralization; 5. Cost; 6. Speed; 7. Capacity; 8. Application

Bitcoin's dominance is declining. The majority of growth is coming from altcoins. Will there be a market consolidation? There is no perfect cryptocurrency and the market will require many cryptos with various unique attributes

Bitcoin's dominance in the market is declining. Most of the growth actually comes from various alternative coins. Will there be consolidation in the digital currency market? In my opinion, there is no perfect digital currency in the current market. The market needs more digital currencies with different characteristics and innovations.

Today, tokenized economies provide a new financial tool to better incentivize different members of an economy. The value of tokens distributed to early adopters will increase as the value of the entire economy increases.

“Most tokens will very likely fall into the definition of a security and will be subject to the regulation of a security, but I believe regulators need to prepare a good answer on how to deal with such business innovations.”

Most tokens will eventually be defined as securities and will be regulated by securities laws. But I believe regulators need to seriously prepare for this kind of unprecedented business innovation.

The Denationalization of Money is a 1976 book by Hayek in which he advocates opening up central banking to free competition.

A central bank is an institution that manages fiat currencies, among other functions, providing money in an economy, managing interest rates and exchange rates, etc.

This economy can be a country or a virtual entity, such as an online gaming community or a monetary instrument for a specific industry.

Imagine a private company in region A, forming a committee that includes retired central bankers living in regions B, C, D, and E. This group can form a private central bank.

“I believe that private central banks will evolve, that some private companies will decide that their business is to be a private central bank.”

I believe that private central banks will participate in the market and that some private companies will decide to engage in private central banking business.

Private central banks based on blockchains will be contracted by nations that decide to outsource central banking to solve issues that cannot otherwise be resolved.

Private central banks based on blockchain will be used as central banks by different countries to solve problems that were originally unsolvable.

This type of private central bank would be responsible for that country's monetary policy so that the citizens of that country have confidence in the stability of their country's currency.

Strict compliance with AML (Anti-Money Laundry) laws is essential for the continued operation of a private central bank. If a monetary system is easy for criminals to use, it will never be a good monetary system for storing value.

For example: E-Gold was shut down by the US government. Before that, it was used by many criminal activities without supervision.

So what is the best response strategy for global governments?

I believe that this wave of digital currency will continue to develop no matter what, and governments and regulators should embrace it instead of rejecting it. This is a brand new business, a brand new industry. It will make the world a better place. It will keep people living in countries controlled by corrupt governments away from hyperinflation.

Bitmain is very interested in investing in private central banks that use blockchain technology. They can issue private currencies and then sell them as a service legally to countries or institutions in need.

We will invest in 20-30 companies that want to start businesses in this very unique field.

If you are starting a business in this field and need investment, you can send your information to: [email protected]