Central bank digital currencies bring many benefits, but also challengs

CBDC

Central bank digital currencies, or CBDCs, are now being researched in 87 countries. Their stage of development varies from initial research to implementation. However, like everything, CBDCs can bring with them risks that need to be addressed. The risks in question mainly concern privacy. Let’s take a look at them.

Pressure on governments

The pressure on CBDC is to some extent understandable. States exploring central bank digital currencies hope that such a currency will revitalize the payments infrastructure and allow more people to enter. Further, it would be about maintaining control over the currency and also making cross-border payments easier. This all sounds great, but concerns remain.

Benefits

With the number of countries exploring central bank digital currencies currently, one can see the global interest. So the benefits can definitely include the speed and cost of transactions. These will become faster and cheaper. This will make trade much easier. At the same time, people will not have to wait long for possible support from the state and cross-border purchases will not take several days.

Challenges

However, as we know cash is completely anonymous. You don’t know who owned the note before you or who will own it after you. Moreover, introducing a completely new system will not be a cheap affair and we are still at the very beginning of this journey. Last but not least, probably the biggest concern about central bank digital currencies is the privacy of users. This is an aspect that will need to be explored very well and in depth.

China and CBDC

Some of the biggest concerns about CBDCs come from China, or the digital yuan. China is the farthest in implementing its CBDC and it is already being used there. Experts say the digital yuan could provide the government with users’ personal data, allowing much more detailed state surveillance and some even warn that the connection between state and digitally programmed money could be misused in some form of social credit system, where users will not only be surveyed, but also limited as to what, where and when they can buy.

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Conclusion

Governments are using central bank digital currencies to respond to the ever-expanding field of cryptocurrencies. The cryptocurrency market is evolving rapidly and governments must act to keep up. However, it is important that governments and policymakers also work with private sector experts to achieve the best balance between privacy and regulation.

Source: qrius.com

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