Central bank digital currencies become more and more popular. The governments like the idea to create such money – its easy to control and follow, and more importantly, banks have absolute authority on such cash flow. Which, by the way, is one of the major drawbacks when it comes to digital money. People are wholly dependent on the bank in such cases. On the other hand, cryptocurrencies aren’t available for the third parties, giving their owners financial independence.
CBDCs was one of the main topics during the World Economic Forum (WEF), which took place last week in Davos. Joseph Lubin, the ConsenSys founder, issued a whitepaper “Central Banks and the Future of Money.” This document offers several approaches to develop central bank digital currencies. Lubin is one of the most important players in Ethereum. So it doesn’t come as a surprise that he suggested how to design CBDC in such a way, which enables us to build it on the Ethereum blockchain. But experts argue what impact it will have on the cryptocurrencies’ world if this suggestion becomes a reality.
Is CBDCs a threat for the cryptocurrencies?
There is a chance that if the banks issue their own digital money, physical cash will disappear. In that case, the banks can refuse to exchange cryptocurrencies, claiming to prefer using only CBDCs. Such a course will create additional problems for crypto owners and users, also affecting privacy. It’s still too early to say anything definitive about which course of action the banks will take, but nonetheless, analysts worry.
Meanwhile, The Bank of International Settlements (BIS) issued a few days ago that CBDCs are undergoing serious consideration by a lot of central banks around the world. According to the report, emerging market economies are moving from conceptual research to intensive practical development. Globally, Central banks say they are likely to issue the first CBDCs in the next few years.