The results of a recent survey released by the Bank of International Settlements have given rise to two different views of the CBDC (Central Bank Digital Currency). Banks in emerging market economies (EMEs) are accelerating the issuance of government-backed CBDCs, while banks in developed countries appear to be more cautious about the transition from traditional fiat currencies to digital currencies.
Ironically, the banks most likely to bring the world into the digital currency era are the least likely to be the first to adopt digital currencies. What is driving or hindering them from being willing to speed up?
In the next three years, 1.6 billion people will use CBDC
This is the most startling finding in this study, and it's appropriately titled: "Coming Soon-A Sequel to the Central Bank's Digital Currency Survey". The survey includes 66 banks, accounting for 75% of the world's population and 90% of economic output. 10% of banks said they will issue the first batch of universal CBDCs in the next three years, accounting for 20% of the global population.
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This means that the creators of digital currencies have been working hard for the past 10 years, hoping that the stable use of digital currencies on a large scale may become a reality, even if issued by the national central bank.
In discussing the report's findings with Cointelegraph, Himanshu Yadav, co-founder and managing partner of the multi-asset investment fund Woodstock Fund, said: "With the launch of the CBDC, More and more people want to know about digital currency. "He continued:
"Some people will ignore them, and some will explore them further, which will lead to a positive net income for the cryptocurrency ecosystem. Developers will develop tools to enable a seamless exchange between CBDC and cryptocurrencies. In this decade, The race for digital currency hegemony will be the center stage. "
Most CBDC will be issued in emerging market economies
This makes sense for emerging economies, which have historically faced issues such as payment efficiency, security, and inclusive finance. Issuing a CBDC can reduce or even eliminate these inefficiencies that hinder serving the current market and global expansion.
Nataly Simso, the chief operating officer of Coinsbit.io, an Estonian cryptocurrency exchange, talked about what this new and huge potential user base means for cryptocurrency:
"As the number of users using blockchain technology continues to grow, the industry will need to adapt to meet the daily purchases of these currencies, not just transactions. Emerging markets can develop in less developed countries that intend to issue CBDC, which is also our market The reasons for connecting directly to Amazon and eBay will increase the acceptance and use of CBDC and cryptocurrencies. After unlocking, more consumers will benefit from the entire cryptocurrency ecosystem. "
Cash increased, but cash used for payments decreased
This trend reported by banks gives us insight into how consumers use money. Cash is used to store value, not to pay. As people choose different payment methods, the movement of a cashless society will continue. Element Zero CEO Jude Regev believes: "Issuing a forked CBDC brand may gain greater acceptance than an asset-backed government currency."
As consumers become more accustomed to using digital means to exchange value, the transition to CBDC is a natural process. In predicting the future impact of CBDC on cryptocurrencies, South African director Monica Singer, who focuses on Ethereum innovation company Consensys, said:
"Once users realize how easy it is to use CBDC, they will be keen to try and invest in cryptocurrencies. In the future, cryptocurrencies will be used as a store of value, especially those that are guaranteed, have public trust and strict risks Managed cryptocurrency. "
Dr. Woolf Carl, a professor at the University of St. Thomas School of Law, also believes that cryptocurrencies may benefit from increased use of CBDC:
"Bitcoin benefits from the growing popularity of CBDC because it will be used as the main and default investment product for digital assets. The degree of Bitcoin's gain also depends on its ability to convert CBDC to Bitcoin and vice versa."
Despite the above concepts, so far, the vast majority of digital tokens on the market have yet to get noticed. Consistent with the 2018 survey results, these banks report that there has been no significant change in the use of cryptocurrencies for payments, but 60% of banks said they are "considering" the impact of a stable digital currency on the current monetary system. Many of these institutions are studying the potential risks of their business, which are related to the potential of stable tokens to become mainstream.
Banks in advanced economies are more confident in the current system
From the survey feedback from central banks in various countries, it is clear that some central banks have indeed noticed the value of blockchain to their current system for managing currency transfers and issuance. Their motivation for issuing a universal CBDC also includes financial stability, payment efficiency, and security, but Inclusive Finance ranks low on their list.
This shows that these banks are convinced that they are providing individuals and businesses with affordable financial products to meet their needs. One of the initial premises of Bitcoin (Bitcoin, BTC) was to provide people in all walks of life with a way of peer-to-peer (p2p) systems to exchange assets, so in these economies, CBDC may not be necessary Or undesirable-at least not yet. Commenting on the reluctance of more developed economies to issue CBDC, Justin Newton, CEO and co-founder of KYC and AML provider Netki, stated:
Current fiat and cryptocurrency exchanges are like modems in the Internet age. As applications grow, they build an important bridge between the traditional world and the new digital world. Taking the Internet as an example, it wasn't until the advent of DSL and cable modems (then optical fiber) that we really saw our widespread use today. Similarly, CDBC is always on, always providing digital versions of older analog versions. With their availability, people can more easily enter and exit a truly open and permissionless network. "
Developed economies cautious about CBDC
Despite the good information provided by the Bank for International Settlements, responding banks may delay plans to issue a CBDC because of their highly competitive nature. But many banks say they are still researching digital currencies and the feasibility of issuing their own currency.
Although central banks in various countries are moving in the direction of issuing their own digital currencies, central banks in advanced economies may think that they do not need to undergo radical reform and development. Svet Sedov, founder of the survey platform SvetRating, said:
"It's hard to imagine why all central banks want to design a currency that is not under the direct control of (the government). Therefore, it is difficult to predict what kind of obstacles government governments around the world will put on the mass adoption of cryptocurrencies. Until recently All of these efforts have proven to only slightly slow the spread of cryptocurrency, but have not stopped it. "
The central bank plays a key role in the global economy, so any of its blockchain applications are likely to promote the development of the blockchain ecosystem in a positive way. Although central banks in developed countries act more cautiously, the power of blockchain technology will be recognized by government agencies.