What is CBDC (Central Bank Digital Currency)?
Cryptocurrencies have been gaining traction over the past couple of years. Since 2009, several cryptos have appeared and grown in popularity, with Bitcoin becoming one of the more prominent names and quickly being recognized as a legitimate means of trade.
The growth of crypto was further accelerated by the COVID-19 pandemic, as digital transactions became the preferred way of payment. However, one major roadblock against bitcoin for beginners is the lack of support from world governments.
Governments are still warming up to the idea of crypto, and there is little regulation on how blockchain development is handled. While this allows crypto to exponentially grow, it also puts new bitcoin miners in danger of losing a lot from unsavory elements.
Fortunately, several countries have introduced Central Bank Digital Currencies (CBDCs) to incorporate bitcoin and similar digital currencies into their economy. CBDCs are blockchain tokens recognized as the country’s digital tender. The country’s monetary authority oversees acceptable cryptocurrencies and ensures that they don’t exponentially change the country’s economy.
The biggest (and most obvious) advantage a CBDC-authorized coin has over its non-regulated counterpart is its ability to be used as a legitimate digital currency. While this will only be possible if cash is in short supply, CBDCs offer citizens more flexibility with their transactions.
CBDCs also speed up the transition from physical to digital currency. Technologies will also be compelled to keep up and introduce new ways to further incorporate CBDCs into daily living.
Currently, only five countries have fully integrated CBDCs into their economic systems, all of them located in the Caribbean. However, it won’t take long before the rest of the world catches up. Economic powerhouses like China, South Korea, and Saudi Arabia are already piloting their own CBDC platforms while nations like the United States, the United Kingdom, and Australia are conducting their research about it.
To learn more about the exciting possibilities CBDCs can provide, look into the infographic.