Central Bank Digital Currencies (CBDCs : Another Dominating Tool of Governments
Central bank digital currencies (CBDCs) are digital versions of a country's fiat currency that are issued and backed by the central bank of the country. They can be used by individuals and businesses in the same way that physical fiat currencies are used, but they are accessed and stored electronically.
CBDCs have the potential to modernize payment systems and make it easier for people to access and use money. They can also provide an alternative to traditional payment methods, such as cash and bank deposits, which may be less convenient or accessible for some individuals and businesses.
However, the adoption of CBDCs is still in the early stages, and it is not clear how they will be implemented or regulated. Some central banks, such as the People's Bank of China, have been experimenting with pilot programs to test the feasibility of issuing CBDCs. However, the use of CBDCs is not without controversy, and there are concerns about the potential impact on monetary policy, financial stability, and privacy.
Overall, CBDCs represent an interesting development in the world of finance and have the potential to transform the way we access and use money. It remains to be seen how they will be adopted and regulated in the coming years.
WHY GOVERNMENTS WANT CBDC?
The boom of cryptocurrencies has led governments to worry about losing their control. CBDC is a surveillance tool for the government to monitor every transaction that is happening in an economy. Through CBDC governments can easily create currency with just a click. They can remove or ban anyone by just blacklisting their address. As the head of the IMF said in an interview, we want total control over what people are buying and when they are buying it, which is not possible to track with cash. During a time of recession, spending slows in an economy, and that is a bad sign. With CBDC government can easily impose rules on their citizens to spend a certain amount; otherwise their account will get depleted. As in China, the government will decide what you can buy with your money. If they don’t want you to eat meat, they will simply block your transaction whenever you try to buy it. CBDC is a tool created by government to have complete monopoly over their citizens in every aspect of their life.
GOVERNMENTS PROGRESS ON CBDC
USA: USA is still exploring CBDC but if we will look through other perspective it is ahead of every country in CBDC development. More than $100 billion worth of stablecoins are dollar denominated and it’s very likely that one of them will end up being a CBDC, with the primary contender being USDC.
China: Chinese central bank has already started conducting trials of its CBDC in several Chinese provinces. They also advertised their CBDC during the 2022 Summer Olympics in Beijing, where more than $315,000 worth of Chinese digital Yuan were used every day. China is progressing very fast on its CBDC, and it’s very likely we will see some international trade happening in digital Yuan.
India: The Indian government started exploring CBDC in 2021 when it imposed a 30% tax on crypto. India has always taken a negative stance on crypto, primarily because crypto is a direct competitor to CBDCs. Last month, the Reserve Bank of India (RBI) started a trail of the digital rupee in four major Indian cities: Bengaluru, New Delhi, Mumbai, and Bhubaneswar.
Europe: Europe is far behind many countries when it comes to CBDC development, primarily because of the lack of clear regulations. They are still exploring CBDC but it’s highly likely that this year we will see some crypto regulations and then some digital currency trials.
Other major countries looking to explore CBDC are Australia, South Korea, Japan, and Russia.
CBDCs are different from cryptocurrencies in several ways:
Issuance and backing: CBDCs are issued and backed by central banks, whereas cryptocurrencies are not issued or backed by any central authority.
Regulatory status: CBDCs are subject to regulatory oversight by central banks and other authorities, whereas cryptocurrencies are generally not regulated in the same way.
Purpose: CBDCs are intended to serve as a digital version of a country's fiat currency and to be used in the same way as physical currency, whereas cryptocurrencies are primarily used as a means of exchange and store of value, and are not necessarily tied to any particular fiat currency.
Acceptance: CBDCs may be more widely accepted than cryptocurrencies, since they are issued and backed by central banks and may be more familiar to the general public. Cryptocurrencies, on the other hand, are not as widely accepted and may be viewed as more risky or volatile.
Technology: CBDCs and cryptocurrencies may use different technologies to facilitate transactions and record keeping. For example, CBDCs may use a centralized ledger system, whereas many cryptocurrencies use a decentralized ledger system known as a blockchain.
Why CBDCs will fail?
Every fiat currency in existence has either gone to zero or has been devalued by more than 99%. CBDCs are just a digital form of fiat currency with more power and the ability to create it out of thin air. Previously, people didn’t have alternate options, but now they do in the form of cryptocurrency, which is better than CBDCs in every aspect. The more people will learn and understand crypto they will ditch their CBDCs and will switch to crypto. Privacy is a human right, and with crypto, one will get it.
Governments have always manipulated the free market. With CBDCs they will have absolute control over everything we do. Bitcoin was created in the first place to put control in people's hands. As time will pass people will wake up to this reality and they will use Bitcoin standard. As the saying goes, "First they will ignore you, then they will laugh at you, then they will fight, and then you will win. Right now we are at the 3 rd stage, and after that we will win.