Central bank digital currencies (CBDCs) may soon become one of the main trends in global finance. Surprisingly, however, China, long regarded as a leader in the new space, may not even be the first country to launch its own CBDC.
This information was published in a new report by PricewaterhouseCoopers (PwC). The Big Four accounting firm claims that the country with the most advanced CBDC project is the Bahamas, with its so-called Sand Dollar. Since last year, all residents of the country can access the digital currency wallet through a mobile app or physical payment card. Let’s talk about what is happening in more detail.
As a reminder, CBDCs are digital versions of a common national currency, such as the euro or the US dollar, supported by the central bank. Countries around the world are currently exploring the benefits of developing digital currencies. More than 60 central banks are working in this direction, according to PwC, and their progress has «accelerated significantly» over the past year.
The introduction of such a tool will make payments faster. In addition, banks will not have to spend money on paper, although the money will be much more reliable and protected from counterfeiting. Finally, the very idea of a digital means of payment is corny more modern and better corresponds to what is happening in the world at the moment.
With this in mind, it is not surprising that more and more countries are beginning to study this topic in detail. However, although China was considered the unofficial leader in development in this direction – including due to the testing of digital currencies in certain regions – experts assess the situation differently.
What’s happening with China’s cryptocurrency?
In mainland China, the project is still in the testing phase, according to PwC. At the same time, the estimated launch dates were not disclosed, and not all citizens of the country can get access to the new currency.
However, this does not mean that the digital yuan will not be the most efficient CBDC in comparison to the Bahamas after the final launch. China’s economy is the second largest in the world, while the Bahamas is ranked 130th for this indicator. At the same time, other countries, including the United States, are beginning to worry about China’s success in using its national digital currency.
For example, last year the Bank of Japan said that one of the main reasons for accelerating research into its own digital currency is the perceived threat from the Chinese digital yuan. However, last week, representatives of the Central Bank said that they do not believe in a serious confrontation between the CBDC from the PRC and the US dollar.
Here is a replica of the representatives of the main bank of Japan, in which they share their attitude to what is happening. The quote is from Decrypt.
The general public will be one of the biggest beneficiaries of the CBDC as the concept will give it access to digital form of central bank money for the first time. And this is a big milestone in the evolution of money.
The report says that CBDCs are divided into two types: retail and interbank. A retail CBDC can be directly owned by citizens and used as a digital form of cash in addition to paper money. At the same time, the interbank CBDC is restricted for use by financial institutions in interbank payments and financial settlement processes.
Note that there is a huge difference in centralization between CBDC and traditional cryptocurrencies like Bitcoin. Digital currencies of central banks can essentially become another lever of control over the financial flows of the population, since what happens in the niche of digital payments will continue to be controlled by one body. Therefore, you should not write off BTC or other full-fledged blockchain coins from your accounts ahead of time. Bank analogues will not be able to replace decentralized projects.
We believe that the topic of national digital currencies is very important. And although such products cannot compete with full-fledged cryptocurrencies due to their centralization, they are quite capable of claiming the role of a bridge between fiat and blockchain coins for ordinary people who have not yet owned cryptocurrency. In addition, the phasing out of conventional paper money will appease critics who do not see value in the crypt due to the lack of physical appearance of the latter. Therefore, in the end, BTC, ETH and other well-known projects will be the winner here in any case.