Central banks are in a very delicate moment. On the one hand, they have injected large amounts of liquidity into the markets, which is probably one of the causes (perhaps the main one) of the incipient inflation we are seeing. However, withdrawing stimulus could collapse economies that are still growing weakly.
Faced with all this, the ECB has come up with an imaginative and innovative idea that will surely mark a turning point in the monetary policies available to Central Banks: the issuance of NFTs.
NFTs as liquidity drains
The classic way of draining the markets of liquidity has been through bond sales. But if the ECB were to sell part of its incredible bond balance sheet, governments would have trouble financing themselves and interest rates would rise.
That’s when the ECB came up with a stroke of genius: taking advantage of the NFTs (non-fungible tokens) fever to drain the economy of liquidity. They know that fans of NFTs buy everything that is traded and at incredible prices, so the ECB’s idea is to create NFTs on a massive scale and put them on sale, in order to raise money without the need to sell classic financial instruments.
For the time being there will be a small series: pictures of euro banknotes, the video of Mario Draghi saying his classic “whatever it takes” or the document in which Trichett raised interest rates at the worst of the crisis. But ECB President Christine Lagarde has already said that this is just the beginning: “as if we have to take pictures of all the corners of our facilities, we are going to market NFTs like crazy; no matter what we put, everybody wants NFTs”.
A new blockchain
When Lagarde has been asked about whether these NFTs would be on Ethereum she has replied, “Are we crazy? Ni de coña. Ethereum es competencia del BCE. We will set up our own Blockchain, much better than those parodies of money. A centralized blockchain, as it should be.”
The challenges of setting up a new Blockchain are great, but being centralized they are likely to be less. The real challenge is that all this liquidity to be drained by the ECB does not go into hiring engineers to program smart contracts.