The Economist called them “A reincarnation of money”, and the Bank for International Settlements reported that 90% of Central Banks surveyed were engaged in some work related to CBDCs, but what are CBDCs really?
In an attempt to maintain power over the business of monetary policy, central banks have had no choice but to innovate by trying to imitate cryptocurrencies and giving rise to Central Bank Digital Currency (in Spanish Central Bank Digital Currency) or better known as CBDC. It seems the last workhorse of financial entities to stay alive in a context where society does not trust them and from them probably show their interests of political, geopolitical and economic control.
We are in the year 2022 and today more than ever everything points to the digital, as has been mentioned before, and the economy has not been the exception, which is why the central banks of our countries, in order to have control of the economy, they have been studying them for a long time and even already working on the development of these digital currencies that seek to counteract the advance of cryptocurrencies or at least be on par, and when they say it, something very innovative is heard with great benefits for all; however, it would be wise and prudent to point out with the phrase “not all that glitters is gold” to this type of creations that come from financial institutions or state agencies, for obvious reasons, which are the same characters that have led us in the past, and today, to crisis due to bad decisions in monetary and economic policies.
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But in itself, what are CBDCs?
CBDCs are the digital currencies issued and controlled by the central banks of each country, which emulate the fiduciary currency of the country where they circulate. They are presented as cryptocurrencies but they are rather hybrids that although they work in blockchain, they do so in private and centralized networks that are controlled by the central and public economic entities of a country.
If we look deeper, they are the solution for the survival of central banks with the aim of making money an element “more efficient”, that encourages investment, reduces costs, develops automation and allows greater control over the use of money to prevent illicit activities, Or at least this is what they refer to.
“A reincarnation of money” It is what The Economist magazine calls them, a quite captivating title when it comes to lobbying and good publicity, but let us specify a little more some characteristics of these CBDCs:
They work and operate on the blockchain, but on private networks.
They differ from cryptocurrencies like Bitcoin, in that they are centralized.
Privacy tends to be limited or non-existent.
They are free of volatility.
A central bank can control its issuance and monetary policy with which the currency is governed.
They promote financial inclusion, but give the agencies or entities that issue or regulate them greater control and manipulation of those who use them. Being so, this last characteristic, a reason with precedents in the fiat system, to open a debate on economic and monetary censorship in order to pressure individuals or other organizations to achieve objectives or fulfill political interests, example: let us remember the most recent ones in February, news in Canada was the cancellation of a GoFundMe destined for truckers who were protesting the requirement and imposition of vaccines in that country due to Covid19, or the exclusion of Russia from the SWIFT cross-border payment system due to the intervention in Ukraine.
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Knowing all this, CBDCs have particular characteristics that must be submitted to study and discussion in each nation, and specifically by each citizen, beyond being the supposed salvation or the only way to modernize world finances.
In general, they may be an unavoidable element because it is the current current that the countries are taking. We know that there are already several with digital currencies, such as China, which has become very famous in recent times with its digital Yuan, followed by the Bahamas with the Sand Dollar, Saint Lucia, Antigua and Barbuda, Grenada, Saint Kitts and Nieves with Dcash. The big ones like the European Union, the United States, Sweden, Japan, among others that have their digital currencies in the study phase or already in development, in fact according to the BIS Bank for International Settlements, 90% of the 81 central banks surveyed between October and December 2021 were “engaged in some form of work for a CBDC”, a high figure that was undoubtedly on the rise, and being according to the probable reasons a search for change towards digital solutions in the midst of the COVID-19 pandemic, as well as the growth of stablecoins and other cryptocurrencies.
In the case of Venezuela, It is a particular situation because at the end of 2017 the Petro was presented, a crypto asset created by the government, but until today it has not been very successful in terms of its usability and popularity at the macro level, but rather it has been promoted its use for citizen procedures.
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In this sense, it is clear that it is the current route through which money will go, to a digital environment, responding to the appearance of cryptocurrencies such as Bitcoin and the others, it is to be understood that these decisions by governments, and Although it is still early to know who will do it better, it is very certain that cryptocurrencies will have more noise in society, more will be the countries that join the investigations to develop their CBDC setting the trend of digital money, one of the marks that our era will leave.
Disclaimer: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
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