The CBM report identifies XRP and Bitcoin as alternatives to bank deposits but dismisses the prospects of practical applications.
The Central Bank of Malaysia (CBM) has published a controversial working paper assessing the potential of XRP and Bitcoin to replace traditional monetary systems. The document focuses on analyzing the concept of 'modern money' and its application in the context of developing central bank digital currencies, sparking a lively debate in the cryptocurrency community about the future role of private digital assets.
The CBM states that digital assets such as Bitcoin and XRP 'could be widely used as a means of payment outside the banking system in the future, replacing circulating cash or bank deposits if they achieve high popularity.' This is a rare instance where a central bank officially acknowledges the potential of cryptocurrency assets to replace traditional financial systems.
However, the report simultaneously provides negative assessments regarding the real prospects of these two assets. The CBM believes that the lack of a 'stable nominal anchor' and 'fragmentation trends' are serious adverse factors that limit the ability of Bitcoin and XRP to supplement or replace the current payment system.
Technical and liquidity barriers
In further analysis, the CBM argues that the decentralization of cryptocurrency platforms poses significant liquidity challenges. In the absence of centralized intermediaries, 'cryptocurrency platforms need to maintain a large amount of liquidity to facilitate payments between different types of cryptocurrencies,' due to decentralization which 'does not allow the balance sheet of any party to expand or contract flexibly.'
Although the CBM draws quite negative conclusions, the specific mention of XRP and Bitcoin has sparked a wave of debate on social media. The XRP-supporting community sees this as significant evidence that this asset is being recognized by central banks, while opponents argue that this is merely a theoretical analysis in the context of CBDC research.
On platform X, user Casey Delaney emphasizes the importance of XRP being directly mentioned in the central bank's official document, calling it a positive sign for 'the future of finance.' However, some counterarguments reference other studies that dismiss the payment application potential of Bitcoin and Ethereum to substantiate the CBM's position.
Notably, some social media users question the independence of the CBM's research, suggesting that this conclusion is influenced by international organizations such as the World Bank and the International Monetary Fund rather than being based on an objective assessment of technological potential.
