Why Central Banks Are Interested In Digital Currencies
Bitcoin is booming. There has been a lot of news about digital currencies lately. In an interview on Bitcoin, the CEO of Uber said: “We will be looking at the cryptocurrency and / or Bitcoin in terms of the currency to be traded.” Additionally, Landy’s CEO had this to say about Bitcoin: “Believe it or not, we sold 17 cars, Bentleys and Rolls, with Bitcoin. Companies like Tesla, Square and Paypal have made massive moves towards cryptocurrency, with big bets of a billion dollars in Bitcoin in particular.
Whether all of this makes Bitcoin a viable currency rather than a speculative investment or store of value remains to be seen, but there are a growing number of governments around the world that won’t wait. The Bank of England is studying its digital banknotes. The Swedish central bank is testing an electronic E-Krona and emerging economies have established pilot programs.
In 2020, about 60% of the 65 world’s central banks surveyed reported partaking in organized experiments with CBDC. This is up 18% as of 2019. Proponents say that digital currency can facilitate cross-border payments, encourage financial incorporation and payment structure steadiness. But there are also a number of serious threats. Surveillance and confidentiality disputes could arise if the central bank is able to monitor each transaction. In his words, the erstwhile business executive J. Christopher Giancarlo said: “You know, it’s being rolled out around the world. The Chinese experience is very broad. When the world arrives in Beijing next winter for the Winter Olympics, they will use the new digital RMB to shop, stay in hotels and buy restaurant meals. The world will grasp an operational CBDC very soon, in the next year. ”
What is CBDC?
A central bank digital currency, or CBDC, is a digital form of a country’s currency administered by the central bank. Similar to cash, the central bank would issue its digital currency to allow people to conduct daily transactions. Big investors and big companies are now pouring money into bitcoin. This adds general credibility to the famous volatile digital currency. Citibank recently said that Bitcoin could become, the quote, the currency of choice for global trading.
All of this is forcing the Fed to take the digital dollar more seriously.
The United States is also facing pressure from competitors such as China, which has been at the forefront in expanding its own digital notes. China has studied how it could create a digital yuan. The country has steered massive pilot tests in foremost cities in the past. On February 4, China’s central bank also established a joint venture with SWIFT, the global system for financial messaging and cross-border payments.
Many governments, including the UK, Sweden, Hong Kong, Australia, and the US, are exploring how digital currency could work.
The European Central Bank is working with the European Commission on experiments to examine the benefits of a digital euro. It will decide whether to launch the digital euro in mid-2021. Sweden, which has one of the lowest cash usage rates, started a pilot program for its digital currency called E Krona in 2019.