Central Bank of Uruguay Clarifies its Position on Cryptocurrencies and Blockchain Technology

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Mario Bergara, the president of the Central Bank of Uruguay (BCU), clarified the position of the country about cryptocurrencies and blockchain technology. The information has been released by Cripto247, a regional news site.

BCU Clarifies its Position on Cryptocurrencies

The Central Bank of Uruguay has expressed its opinion about virtual currencies. Mr. Bergara talked a the Blockchain Summit that was hosted in Montevideo the past Wednesday 5.

During his presentation he said that it is difficult to think about cryptocurrencies as currencies. Additionally, he analysed the main challenges that central banks are now facing related to the new technologies.

He mentioned about virtual currencies:

“Cryptocurrencies are not stable. They can be everything, but they are not stable. They can be worth 150 dollars and the next day $1000 and so on. What I want to say is that we don’t see Bitcoin and other virtual currencies as a real threat to national currencies. They do not have the necessary characteristics to operate as currencies. They work as financial assets. They must be considered, according to their volatility, as risky financial assets.”

Moreover, he explained that the volatility in fiat currencies is not comparable with the one experienced by cryptocurrencies. He went on saying that in fiat currencies it is possible to understand why the price moves up or down, but it is not possible to do that with virtual currencies.

He has also related virtual currencies with criminals saying that kidnappers ask for ransom in Bitcoin because it is difficult to discover who received the funds.

However, Bergara mentioned that technology innovation is not against financial industry. Bankers are very interested about blockchain and how it can be used in the future to improve the industry. In order to have a secure market, it is important for the regulatory authorities to create a clear legal framework. Indeed, technology should protect and not facilitate money laundering and terrorism financing.

About the technology he stated:

“Blockchain will be a paradigm much more settled [in some years]. In economy it is possible to talk about blockchain economy. It is possible to talk about crypto economics, were the focused is on mechanisms and their design. We analyze incentive mechanism associated to decentralized protocols that build human behavior in digital platforms.”

He then asked the audience whether there is sense to implement blockchain in current systems. For example, one of the most important applications that blockchain technology has is related to know your customer (KYC). In this way, banks do not need to ask for the same information several times. Additionally, banks can be compliant with regulatory agencies and have a strict control on who uses the platform and for what.

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