Yet another piece on the somewhat ubiquitous topic of CBDCs, which are being ‘studied’ pretty much globally, piloted and in a couple of places, already launched. This one is found in PracticalEcommerce and the author gets more into the basics of what these are and why such a subject of scrutiny.
‘Aiming to bring stability and perhaps avoid a financial crisis if the crypto-speculation bubble bursts, governments worldwide are considering central bank digital currencies — CBDCs…..A central bank digital currency is a country’s recognized currency in electronic form. For example, the CBDC of the United States would be the digital dollar. Today, the U.S. central bank, the Federal Reserve, issues paper bills and metal coins. Consumers use those bills and coins physically or store them in bank accounts….In the future, digital currency — with unique serial numbers like the dollar — could replace paper and coins. A digital dollar could be suitable for common transactions (loans, investments, salaries, retail payments) and represent the best of both worlds: the convenience of cryptocurrencies and the regulation and stability of a reserve-backed money supply.’
So the author does get into both ‘reasons why’ and ‘hurdles’ to the issuance of these currencies. With regard to the former, one of the more compelling cases is the mere convenience of them in an online world, which has been clearly underlined during the pandemic. Additionally, providing some stable, fiat-backed currency would seem to be a bit more traditionally secure than a series of privately owned currencies.
On the hurdles side, one of the big concerns is obviously privacy in the form of government intrusion, although most forget that they have already given up their privacy to the social media world, regardless of what ‘protections’ they claim to be giving. It’s a good piece to spend a few minutes reading if interested in the space, in order to gain some top-level familiarity of this eventual reality.
‘Holders of CBDCs would presumably have digital wallets, likely on smartphones. Bank accounts would presumably remain more or less the same. A digital dollar in your checking or savings account would look the same as a paper dollar stored in those accounts. Thus the value of a CBDC would equal a country’s currency — one digital dollar would be redeemable for one paper dollar. This is unlike existing cryptocurrencies with values based on speculation and hype.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group