what are CBDC and advantage ?

17
what are CBDC and advantage ?
Reading Time: < 1 minute

Do governments still hate Cryptocurrencies?

It looks like they’re coming round to the idea, even if it’s not on their terms. Central banks are starting to realize the benefits of currencies making the leap from the physical to the digital realm.

These are known as central bank digital currencies or CBDCs, a digital form of fiat or local currency, like the dollar, pound, naira, euro, rand and ringgit, which are considered legal tender backed by the central government authority, the central bank. There is a good reason for this.

Advantage of CBDC

There are many advantages, from interoperability, technical and functional opportunities to the economic benefits of not having to mint and print physical currency.

Other benefits include more efficient settlements by cutting out intermediaries, an increase in financial inclusion as more citizens would have cheaper, easier access to bank accounts, a decrease in fraudulent activity with easier oversight of the movement of funds and the reduced risk of counterfeit money in circulation, and more.

Of course, CBDC doesn’t just happen overnight. While the outlook is positive, there are still risks and concerns to be addressed. Central banks must deal with how to approach the lending market in order to not dilute its own value.

They’d also have to find ways to manage issues that the banking system currently faces, such as customer complaints and requests, as well as anti money laundering and other fraud prevention measures.

There’s no guarantee that central bank digital currencies would negate these risks and concerns. And, finally, there’s privacy and the concerns of increased state surveillance if all financial transactions and data are available to the government.

Leave a Reply

Your email address will not be published.