Central Banks have hard time launching CBDCs

A recent piece published in Arab News talks about how Central Banks are launching CBDCs ( Central Bank Digital Currencies) and the challenges being faced. The author gives various examples that include China, European Union ad others, as well as recent quote from Feb Board Governor.

China has been working on a digital yuan for seven years and the European Central Bank has a target date of 2025 for the introduction of a digital euro, while the Federal Reserve and the Bank of England have been moving more slowly, with Fed Board Governor Christopher Waller recently describing CBDCs as a “solution in search of a problem.”

One of the issues that Waller has raised is shared by the cryptocurrency community at large: privacy.

CBDCs are issued directly by central banks without an intermediary, so everything you do with them is stored and can be seen by the central bank. Governments can get access to your transaction history through your bank with varying degrees of ease depending on where you live, but CBDCs would provide no privacy at all.

One option is to adopt a token-based system whereby the money would be authenticated but not the owner, but that would represent a backwards step in the fight against money laundering and the ability to enforce sanctions.

One of things that CBDCs would hope to achieve is stop stablecoins – private crypto assets designed to imitate the currencies they’re pegged to – from becoming dominant and creating big risks in the financial system.

However, many of the people who are attracted to cryptocurrencies like them for exactly that reason – it puts them outside the traditional financial system and makes them feel as though they’re sticking it to the man.

A comparison can be made with illegal marijuana use in the US, which has continued to thrive in states where it has been made legal. While some of that can be put down to taxes and other regulatory burdens, it can also be attributed to the reason that many people smoke weed in the first place – it makes them part of a sub-culture.

Of course, the flipside is also true: millions of people who would never use bitcoin because it’s unregulated could be attracted to a CBDC with all the security that brings.

Add to that the fact that most owners of bitcoin and its brethren are investors who have no intention of using them as money anyway and the task for central banks wanting to replace independent cryptocurrencies looks harder still.


News Desk

Unlock News Desk, is a group of Blockchain and Crypto enthusiastic young people, working to keep Unlock readers up to date with the industry news. Connect with the team via email: info(@)unlock-bc.com

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