CBDC Is Gaining Momentum
Central Bank Digital Currency (CBDC) is gaining momentum, according to the results of 2021.
BIS survey on central bank digital currencies,published in May
noted that more than a quarter of central banks are developing or running concept pilot plots.
The BIS paper consisted of 81 central banks surveyed, which concluded that CBDC is gaining momentum due to several factors
The pandemic has spurred demand for contactless digital payments, and the emergence of cryptocurrencies as part of the financial landscape has accelerated central bank interest in CBDC.
CBDCs will be the future of money, as the BIS paper cites that two-thirds of central banks will be issuing CBDCs in the near to the medium term.
CBDCs are gaining momentum, with some central banks launching their digital currencies in the past few years
Bahamas was the first to launch a live retail CBDC (the Sand Dollar) in 2020. Nigeria followed in 2021 with the issuance of eNaira. Moreover, the Eastern Caribbean and China released pilot versions of their respective DCash4 and e-CNY.
The definition of CBDCs given in the BIS paper is as follows;
“A CBDC is a central bank-issued digital money denominated in the national unit of
account, and represents a liability of the central bank,” writes the BIS paper.
So the banker of central banks is making it clear that CBDC is gaining momentum because it is the future of money, unlike cryptocurrencies which are similar to a NASDAQ stock with a practical technology application.
Put simply cryptocurrencies are not money as they do not have a claim on central banks.
In other words, cryptocurrency investing is about investing in cryptos with underlying immutable blockchain technology enabling practical applications.
Central banks are already using blockchain networks with proof of work consensus mechanism,
the most secure network, to issue bonds directly to investors, thereby saving millions of dollars in commercial fees charged by intermediary commercial banks.
In April 2021, The European Central Bank (EIB) issued its first digital bond on the public blockchain platform Ethereum
As we have said previously, the best performing cryptocurrency investment will be those with immutable blockchain networks enabling smart contract applications. These cryptocurrencies will be in demand and be able to charge developers higher gas fees because the technology will save businesses and governments millions of dollars in intermediary and legal fees.
The security of the network will also drive the price of cryptocurrencies.
The proof of work consensus mechanism is currently the most secure blockchain network.
So CBDC is gaining momentum as a string of central banks are expected to launch their digit currencies. No doubt, CBDC will be hosted on the most secure blockchain network,which is proof of work. .
A caveat to cryptocurrency investors, steer clear of cryptocurrencies claiming to be digital money. Moreover, regarding the recent instability of the Luna stable coin, it is clear that central banks want to fill the vacuum with CBDC.