Welcome to the world central bank digital currency (or CBDC), where large countries such as China and smaller countries such as the Bahamas try to make a mark. The world is home to 86% of the world’s central banks trying to create digital currency. Nearly 60% of them have started to work on this concept, and 14% have already launched a pilot program.
Related: How did CBDCs impact the crypto space in 2020 and what’s next for 2021? Experts have the answer
CBDC: A global perspective
A CBDC, or digital currency, is a version of a country’s national currency that can be used around the globe. You can store a digital currency on your phone to purchase anything you like, not unlike a national currency.
Five countries have already launched their digital currency. According to the Atlantic Council, 81 countries account for 90% of the world’s GDP and have begun researching digital currency. This is only the beginning.
Similar: The CBDC promised land
According to a Bank for International Settlements survey, digital currency will boom over the next few years. According to the BIS, one-fifth countries will soon launch a digital currency.
China is currently at the top. With its CBDC, or digital yuan, they have already transacted more than $5 billion. This could give China an advantage over the U.S. dollar, according to some.
Related: Experts explain how the digital Yuan stablecoin affects crypto in China
How can CBDCs be used? There are many ways to use CBDCs. They can purchase necessities such as food or medical supplies. It is best to not use the digital currency for purchasing alcohol or cigarettes. Digital currency is also useful in times of pandemic. Digital wallets can be used to quickly send government aid. It can also be used to stop government malpractice.
Are Americans ready to join the CBDC world?
The U.S. Federal Reserve remains skeptical about central bank digital currencies’ effectiveness. They have years to go before they can develop their own digital currency. Meanwhile, according to a Bank of America report, digital currency would make the U.S. dollar “remain highly competitive…relative to other currencies.”
A hearing was held by the U.S. House Committee on Financial Services to discuss the drawbacks and benefits of digital currencies central banks. Julia Coronado, MacroPolicy Perspectives’s Julia Coronado, was among those who attended the hearing. They expressed concern that the U.S. should be more serious about CBDC and play a leading role.
China leads the race, and other countries are making steady progress. America’s laid-back approach to digital currency will mean that it cannot decide its future.
Why is America so laid back about digital currency?
The U.S. dollar is still the dominant currency and this could be why America isn’t taking proactive measures regarding digital currency. What America doesn’t know is that CBDCs could remove the U.S. Dollar from its position of global reserve currency number one in the future.
Digital currencies would remove all obstacles for countries to make financial transactions directly with one another. They would no longer have to rely on the U.S. dollars. The U.S. Dollar is the world’s reserve currency. This is why it is so dominant. It is used for convenience. These people can now use digital currency to settle trades directly.
Related: China’s CBDC is not about beating the dollar, but domestic dominance
The U.S. dollar forms an integral part of America’s foreign policy. The federal government has the power to exempt sanctioned countries from the dollar system.
Everything depends on the United States. The United States may not be able to provide much information about cross-border transactions if the country does not have its own CBDC. The Society for Worldwide Interbank Financial Telecom network can be supervised by America if other countries use digital currencies for transactions.
What can the U.S. do?
Digital currency has one drawback: it lacks privacy. The fact that digital currency transactions can be easily monitored by the government may not please many Americans. This concern can be alleviated by the U.S. government. It can create a digital currency that doesn’t allow privacy infringement. Chris Giancarlo, co-founder of Digital Dollar Project:
“If this is the tech of tomorrow, we want to ensure the U.S. brings democracy to bear.”
The digital currency is here to stay, if you look closely at the current situation. The digital currency allows central banks to communicate directly with citizens. This can be extremely useful during times of crisis.
Digital currency could reduce the cost of global financial services by being widely used. It could be the easiest way to transact financial transactions, and it may even lead us towards a cashless society.
Is it possible to eliminate cash entirely? It’s impossible to know, as cash is still the most private type of money. The central banks do not recommend the total elimination of cash.
It will replace Bitcoin (BTC), and other cryptocurrencies. CBDCs are digital government currencies. The second is non-governmental digital currency. This is the fundamental difference between CBDCs, and cryptocurrency. CBDCs will not replace cryptocurrency as of right now. However, it is more convenient to use for private transactions and is less vulnerable to hackers.
The next big question is: Where does America fit in the CBDC community? It is easy to answer. It will remain on the sidelines if America is not ready to accept digital currency. It will lose the chance to create a digital currency which is democratic and places a strong emphasis on privacy. Michael Sung, Fudan Fanhai Fintech Research Center Shanghai, said that “You will see a huge transformation in the international monetary systems.”
If this is true, and digital currency is widely used, the U.S. Dollar’s value as a global currency will decline. The United States can help 14 million adults who are not yet banked to access the financial system if it acts responsibly and creates digital currency.
These views, thoughts, and opinions are solely the author’s and do not necessarily reflect the views or opinions of Cointelegraph.
Lyle Solomon, a principal attorney at Oak View Law Group, California, specializes in consumer bankruptcy. Solomon is an experienced litigator with many articles about financial well-being.
Eileen Wilson –Technology and Energy
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