Central Banks to launch their own digital currencies, the concept of digital currency is not unusual to us anymore. Many of us use digital wallets, debit and credit cards, or payment apps for our day-to-day transactions. it is similar to paper banknotes, the only difference is that’s it’s virtual not having a physical form, The term digital currency is been floating around ever since the advent of bitcoin and other alternative coins.
Central Bank Digital Currencies (CBDC) will be controlled by the central bank unlike bitcoin and other cryptocurrencies which is a decentralized digital asset and is not issued by an institution or a single administrator it can be sent from user to user on the peer to peer blockchain network, without the need for intermediaries. but why there is a sudden rush in going Digital? what’s new about digital currencies? Will it allow authorities to track precisely how you or your friend or the person down the street is spending the money are they spending their money on buying things they shouldn’t be buying, Are they gambling with their money WHAT are they doing with their money !!.
One of the significant developments in the finance sector over the last few years and the rise in popularity of cryptocurrencies, with one, in particular, is Bitcoin. Bankers began to realize they were actually under some threat and are worried that the widespread adoption of these autonomous cryptocurrencies could weaken their control over the financial system. The concept is very clear here before it’s too late let’s dive into it.
As we all know cryptocurrencies do not have the legal or regulatory sureties which central bank money does. So why not issue a digital currency of their own. imagine a digital currency that is recognized by law and backed by the power of the central bank, which cannot go bankrupt. unless the commercial bank collapses. Central bank digital currency could be circulated through commercial banks, avoiding too much disruption to the financial system or the central bank having to deal directly with many millions of citizens and businesses. Issuing digital currencies could also make it easier for governments to deliver stimulus checks, tax returns, unemployment benefits, or even go one step further and make targeted payments to those deemed most in need making local and regional cross-border digital payments quicker, more affordable, more reliable and convenient.
CBDC role in Economic Growth
Banks will now all have to annually report all transactions back to the government, which means the government will be able to see all transactions in the system, it could trace, each one back to real humans, based on the shopping habits they could use the data to manage the economy more efficiently and to build up the types of detailed user profiles of citizens and businesses.
Digital currencies and distinct innovations in payment systems could boost the speed of domestic and cross-border transactions, lessen transaction costs, and ultimately broaden access to the financial system by poor and rural households.
Tech giants vs Govt?
In 2018 Facebook announced Libra with bold ambitions to create a cross-border currency for its over 2 billion users during this year’s mobile wallets exploded in popularity.
Tencent and Alibaba China’s two largest tech companies started to gobble up the entire finance industry of china, their respective mobile wallets came to dominate the mobile payments category, almost every shops you will find it is believed that almost all payments in the country are done using their app. consumer often have no choice but to use their services.
It is very interesting to see what all information can be accessed by govt the only difference here will be tech giants used these data to sell us more product based on our interest
Countries opted for Digital currencies
China started talking about its own digital Yuan in 2013 and after 7 years of research and development, they launched public trials in 2020, spanning four Chinese cities and hundreds of traders. residents were given a small amount of it through a lottery system, lots of merchants, including Didi, the country’s equivalent to Uber, Meituan, the popular food ordering, and local services platform, as well as Starbuck, McDonald’s, for example, started accepting payments over it. China has clearly stated that this currency is also supposed to help them with their international and their cryptocurrency challenges, their exact plans for that seem to be much less clear.
China’s digital Yuan project is just like the regular Yuan and is issued by the People’s Bank of China and can be withdrawn by them as well, designed to be a legal tender, again, just like cash, meaning that legally, everybody taking digital payments at the country would have to accept it as a payment method.
Bahamas and Cambodia technically both beat China by launching their respective digital currencies called the sand dollar, and the back on the first, the Cambodian currency is even blockchain-based, other countries are not left behind like Russia (Crypytoruble), Japan (J coin), Dubai (Emcash), Sweden (E-Krona) its believed to go completely cashless. Singapore, Canada, Uruguay, the Bahamas, Thailand.
India recently declared an embargo against private cryptocurrencies and has expressed its interest in digital currency or CBDC that will be appropriately regulated by the Reserve Bank of India (RBI).
The most interesting and clearly most unfortunate example of a country trying and failing to launch a state-issued cryptocurrency has to be Venezuela, called the Petro It was announced in 2017 as an alternative currency, backed by the country’s fast, oil and mineral reserves, while the country’s regular currency was going through some of the world’s worst hyperinflation it sadly didn’t work so many Venezuelans have apparently started turning towards Bitcoin as a store of wealth, as well as online jobs that they can get paid for and international currencies.
So, these authorities are taking their time exploring concepts and learning from successes and failures before they commit to anything.