YEREVAN, June 5. /ARKA/. The Chairman of the Central Bank of Armenia, Martin Galstyan, was a speaker on the Rearrange podcast. The conversation covered a variety of topics, including the prospects of the banking system, the possibility of introducing a digital currency in Armenia, and the topic of public debt.
The development of the banking system – with or without banks?
I don’t know whether [participants in the banking system] will be banks or payment companies that also have a banking license. There may be various modifications, but the idea will be to be able to provide clients with a service quickly, almost free of charge, and securely.
For example, what are stablecoins? Typically, they are not used very often as a form of savings or investment. But in the world of payments today, they are very popular because they genuinely solve existing problems. If, at some point, stablecoins, along with open banking, allow people to manage their data and transfer clients’ financial information from one bank to another, competition will lead to improved quality.
Bill Gates once said, “Banking services – yes, banks – no.” We see that banks still exist, although this prediction was made 20-30 years ago… I think banks will exist, but they can significantly transform their approaches.
Central Bank Regulation vs. Crypto
The market, the world itself, didn’t understand what to do with crypto. Are regulators dynamic enough to implement all these changes? Unfortunately, no.
We have significant limitations, and innovation is limitless in its possibilities, but we must strive to act quickly.
Preventive regulation isn’t always a good thing because you don’t know the end result: regulation could kill the market, and the product might not even be created. But when a product is created, it may contain risks that haven’t been addressed regulatory-wise, and once it’s widely distributed, problems will arise. Public decisions here are very complex.
Should there be a digital dram?
Discussions about a digital dram are ongoing within the Central Bank, but there are several alternatives. If, for example, stablecoins begin to develop here, and successful stablecoin players resolve the payment issue, then what’s the point of creating a digital dram?
Looking at central bank digital currencies, so-called CBDCs, they don’t have many use cases. Typically, they’re funds that can be spent on specific purposes to implement government programs.
Is debt overload a concern?
The Central Bank is closely monitoring this. The rule of the game is this: when something (the volume of issued loans – ed.) increases significantly, we try to increase the shareholder share in banks and create equity buffers. This is done so that if the risk suddenly materializes and they are unable to repay their debts, the owner would cover this risk with their own funds.
Regarding Armenia’s public debt
Sleep well: our public debt is below 50% of annual GDP. There are countries whose debt is twice their annual gross domestic product. For example, Japan.
Or the United States, where the problem of debt and fiscal sustainability is very serious. Today, for example, I don’t see a single politician in the United States who could honestly talk to the people about debt and fiscal problems, admit to them the serious problems associated with debt, and talk about the need to raise taxes and cut spending in the near future to bring the debt to a sustainable level.
I don’t think such a person exists, and it’s even more unlikely that someone who says this could be elected.
