Many people are unaware of the fact that CBDCs just like Bitcoin owe their origin to the financial crash of 2007-08.
A CBDC or a Central Bank Digital Currency builds on the technology and benefits of cryptocurrencies like Bitcoins but allows for the removal of negatives, including the fluctuating prices and volatility.
The reasoning behind the same emanates from the fact that since CBDCs are backed by banks and governments, it will be more stable, inspire more confidence, and be used as a mainstream currency by the local population.
In other words, the legality of CBDCs coupled with their benefits are being pitched to attract mainstream adoption.
We are examining the different aspects of CBDCs. We will look at its advantages, draw parallels with Bitcoins, and conclude by listing where different countries are in terms of their native CBDC development. For more information, you can visit here
CBDCs and a Cashless Society: How far have we come?
Everyone reading this article would attest to the fact that they have hardly visited their respective banks in the past few years. Debit Cards, Net Banking, Banking Apps, Wallets, and Gateways have defined our financial existence these past few years.
Governments the world over are trying to push for a cashless economy. Some of the major reasons behind the same are-
- Less black money flow into the economy
- No counterfeiting of currencies
- Better surveillance over finances
- Clearer taxation proofs
- Greater circulation and movement of money
- Inclusion of the poor and downtrodden
If you look at it, CBDCs are the next logical outcome of a cashless society. The move towards a digital-based economy has been in the works for quite some time now.
Cryptocurrencies Versus CBDCs: Similarities and Differences
In the opening sections of the article, we mentioned how CBDCs are very similar to cryptocurrencies. However, there are other differences as well.
- In terms of security, speed of transactions, and maintaining records of the same, CBDCs are modeled on cryptocurrencies like Bitcoin. They promise to improve the spread of financial activities to people who are still not under the formal banking processes.
- Using smartphones with internet connectivity is the only precursor for extending banking to these sections of the population. Many nations, including China, which has launched its CBDC, Digital Yuan, has followed Bitcoin and Blockchain very closely to create their own model.
- In terms of differences, the major one is ownership and control. CBDCs are controlled, monitored, and surveyed just like your existing normal currencies. The government and the central bank are the custodians of the monetary system and everything works according to what they say.
- In other words, the decentralization element, which makes cryptocurrencies like Bitcoin attractive does not work in the case of CBDCs. This allows for greater monitoring and more questions being asked at every transaction level.
Are Countries actively pursuing the Development of CBDCs?
According to the bitcoin profit app, countries like China, Russia, Iran, and Turkey along with some Latin American countries are already in the beta stage of testing their CBDCs.
Whereas on the other hand, the European countries have shown a greater proclivity towards Bitcoin and other cryptocurrencies. However, this does not mean that any development has not taken place in the sphere of developing CBDCs.
Finally, the world’s two major superpowers, the United States of America and the United Kingdom have been termed to be the most backward in terms of CBDC development.
Talks on the Digital Dollar only started picking pace when China announced the launch and roll-out of the Digital Yuan. Many feel that the United States has already missed the bus in terms of this new technology.
The United Kingdom, on the other hand, is slowly espousing an inward model, looking at the BREXIT and if government sources are to be believed, nothing has yet been done in this regard.
The launch of CBDCs the world over is pretty imminent. The increased activity has also been because of the rising interest and popularity of Bitcoins. The year 2021 promises to be a great year for digital currencies in general and CBDCs in particular.
HussaiN is a full-time professional blogger from India. He is passionate about content writing, Tech enthusiast & computer technologies. Apart from content writing on the internet, he likes reading various tech magazines and several other blogs on the internet.