We might be reaching the point where virtual currencies start to pose a real challenge to the existing ones: the dollar DXY +0.02% , euro EURUSD -0.03% , yen USDJPY -0.02%  and pound GBPUSD -0.73% . Indeed, at the end of last year, the ECB put out a paper warning about the competition from these new currencies. Although still small, the paper suggested they might undermine the credibility of national currencies.

 

It is not hard to see why central bankers are worried. Right now, virtual currencies are tiny. Hardly anyone is taking them seriously. And yet people are increasingly losing faith with traditional currencies. They are losing value steadily to inflation. And quantitative easing and currency wars mean they are constantly being debased. They are open to alternatives.