Central banks around the world creating their own digital currency
2023.01.16 13:38
Central banks around the world creating their own digital currency
By Tiffany Smith
Budrigannews.com – Despite the numerous breaches of the cryptocurrency industry over the past year, global central banks are moving forward with projects related to digital assets. China has made its central bank digital currency (CBDC) available for use at the Winter Olympics and has spread it to several cities.
While Nigeria’s CBDC has not yet been widely adopted, many other central banks, including the Bank of England, are considering how to implement one. India has already started a pilot program, and Mexico has confirmed that it will start using a digital peso.
However, in a recent Financial Times opinion piece, Tony Yates, a former senior adviser to the Bank of England, advises against CBDCs. “The huge undertaking of digital currencies is not worth the costs and risks,” Yates asserts.
The majority of nations already have digital versions of cash, coins, and notes, so CBDCs are already in place. As a result, Yates labels the “suspect” motives behind the global rollout of CBDCs.
CBDCs could be used to stop crypto, like Bitcoin (BTC), which is a decentralized currency. However, he adds, “Cryptocurrencies are such bad candidates for money”:
They are extremely costly and time-consuming to use in transactions, and they do not have money supplies managed by humans to generate steady inflationary paths.
It should come as no surprise that Yates views Bitcoin in a particular way. He has claimed in numerous tweets that the majority of Bitcoin usage is “illicit” and “speculative.”
I would guess that most of the use is either 1) speculative or 2) illegal and not discouraged by central bank provision; A large number of users could be wiped out and dissuaded if the price of CBDC were to significantly decrease.
According to reports, the use of Bitcoin for illegal purposes has steadily decreased over time to less than 1% of all transactions due to the use of a public ledger that is accessible to everyone.
In addition, the layer-2 Lightning Network permits instant remittance payments, and the use cases and development of other cryptocurrencies and even stablecoins continue to expand.
The introduction of CBDCs, according to Yates, is comparable to “making central bank reserves more widely available than just to counterparties.” However, competition for a new global CBDC is counterproductive in a world where the U.S. dollar serves as the reserve currency.
According to the Financial Times opinion piece, the most persuasive arguments in favor of CBDCs revolve around settlement efficiency and payments, but the debate is “mysterious.” According to Yates, the central bank would have to hire a lot of people to build and manage the software and hardware of a new payment system, which would be a huge undertaking.
