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Live Trading News > Blog > Crypto > Bitcoin > Crypto: The CBCD Race is On!
Bitcoin

Crypto: The CBCD Race is On!

Paul Ebeling
Last updated: April 9, 2022 5:21 am
Paul Ebeling
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#crypro #cryptocurrency #CBCD #government #innovation #research #development #integration #money #digitaal #assets #China #eCNY #bitcoin #blockchain #banks #finance #economy #knightsbridgedao

“According to the Atlantic Council’s Central Bank Digital Currency Tracker, 87 nations representing over 90% of the global GDP are actively exploring CBDCs”–Paul Ebeling

As governments around the world move forward with CBDC research and development, it has become clear that such assets will play a notable role in achieving a stable economy.

The Big Qs: What are the benefits of implementing CBDCs for the global payment system, and what are the potential downsides that are causing governments around the world to tread carefully in this matter?

The Big As: Among them, 9 countries have already launched their state-issued digital currencies. Meanwhile, 15 central banks are currently piloting their CBDCs, with China as the global leader among major economies that even showcased the trial version of the e-CNY during the 2022 Winter Olympics.

The other contenders in the CBDC race are either developing or researching the potential implementation of a central bank digital currency. The United States has newly joined, where the exploration of a state-issued cryptocurrency has officially kicked off after Mr. Biden signed an executive order on digital assets on 8 March 2022.

As the digital version of a nation’s fiat currency, CBDC is not subject to the excessive volatility of cryptocurrencies yet retain most of their benefits, e.g., instantaneous transactions and low fees and offers complete control to the state. Most importantly, CBDCs will significantly affect the financial system and its structure.

Now, if you pay a bill via your debit card or bank account, you spend privately-issued money held at commercial financial institutions. For that reason, you don’t have a direct claim on the state-issued public money, but on your bank’s deposits that are only partly backed by liquid reserves held at the central bank.

CBDCs do not necessarily involve the participation of intermediaries, e.g., private financial institutions as they can be issued directly to citizens via financial accounts connected to the central bank. This implementation is inefficient and resource-heavy.

With the hybrid structure most governments are exploring, CBDCs represent a direct claim on the central bank, offering citizens access to safe public money instead of risky commercial bank deposits. At the same time, private financial institutions handle the technical side of the payment network, which fuels innovation.

With central bank guarantees, CBDCs lack the credit and liquidity risks of the existing economic system, which states could utilize to achieve better financial stability. Furthermore, governments can leverage the blockchain’s traceability to execute monetary policies in real-time and tackle financial crime more efficiently.

Some potential downsides pose a challenge in implemenпting CBDCs into the existing financial system. Among them, privacy is the Top concern. Since blockchain transactions are recorded publicly on the ledger, the state could gain increased insight into citizens’ personal finances.

Governments have to be smart about the actual implementation.

They have to make CBDCs enticing for consumers so they would have a reason to replace their current payment services. But at the same time, they need to turn to the central bank to lend out money, since commercial banks do not have access to retail deposits, which could drastically change the credit landscape.

And, as we have seen in the crypto industry, cybercriminals can adapt to changes quickly and efficiently, especially when they see lucrative opportunities. As a result, the government has to put a major focus on securing its CBDC ecosystem as well as monitoring and responding to new types of financial crime.

Governments have to tackle many challenges and tread carefully with the design and implementation of central bank digital currencies. And, so long as the right decisions are made in this field, central bank digital currencies can become a powerful tool on the global stage.

From eliminating the risks of commercial bank defaults and solving the unbanked problem to making cross-border transactions more efficient by cutting out financial intermediaries and reducing the time and cost of transfers, CBDCs offer many benefits that could be used to improve global financial stability and boost economic growth.

Many see CBDC as a tool to combat the popularity of digital assets like Bitcoin, it is more than that. Combined with advancements in the field of digital asset regulation, CBDCs make it easier to integrate crypto and blockchain concepts with traditional finance, where they will eventually play an important role in shaping the future of the global economy.

With widespread adoption, CBDCs could be used to fuel innovation and international collaboration, significantly boost the competitiveness of businesses and improve the quality of life of the world’s population.

Have a happy prosperous weekend, Keep the Faith!

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TAGGED:assetsBanksBitcoinblockchainCBCDChinacryprocryptocurrencydevelopmentdigitaaldigitaleCNYeconomyfinancegovernmentinnovationintegrationKnightsknightsbridgedaomoneyresearesearch

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By Paul Ebeling
Paul A. Ebeling, a polymath, excels, in diverse fields of knowledge Including Pattern Recognition Analysis in Equities, Commodities and Foreign Exchange, and he is the author of "The Red Roadmaster's Technical Report on the US Major Market Indices, a highly regarded, weekly financial market commentary. He is a philosopher, issuing insights on a wide range of subjects to over a million cohorts. An international audience of opinion makers, business leaders, and global organizations recognize Ebeling as an expert.   
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