Several central banks in Europe and America announced the implementation of a possible operating manual for the use of digital money. The objective of this initiative is to advance the development of cryptocurrencies and circumvent the concerns of governments about blockchain technology that promises to revolutionize the global financial system.
The monetary authorities are concerned about the growing boom of Bitcoin and all other private and fiat digital currencies. They fear that control of money will slip out of their hands and are studying the launch of their own virtual money or CBDC (central bank digital currencies).
Lawmakers around the world, from the United States to China, are analyzing a legal framework to regulate the use of cryptocurrencies. While the central banks are studying the creating their own digital currencies and continue to explore how and when to launch CBDCs.
There are already experiences like Sweden, which has made great strides in issuing its digital currency. The digital crown , is the second of the world to be fully issued after “dollar sand” from The Bahamas.
China leads the race to digitize money
The race of central banks for control of digital money takes place in times when the use of cash is declining around the world and the adoption of cryptocurrencies has skyrocketed. Not only in the more developed economies, but in emerging and many backward economies.
Among the most advanced economies struggling to establish their own digital currency and compete with Bitcoin and the cryptocurrencies independent, China is head. The digital yuan is still in the test stage and is already used in various regions of the Asian giant.
To clear the way for the development of its digital currency, the Chinese regime has ordered a relentless persecution against Bitcoin and the rest of the crypto industry. Likewise, the Federal Reserve of the United States, continues to study the development of the digital dollar.
Fed Chairman Jerome Powell confirmed that the issuing body is advancing its plans to issue its own digital currency. Soon, the US central bank will publish a document on the costs and benefits of the digital dollar. However, it has not yet made a final decision, Powell said.
Similarly, the Bank of England is closely examining the potential of digital money. And he doesn’t want to be left behind in the race, either. Last April it launched a pilot plan for the implementation of its digital currency. The European Central Bank (ECB) did the same and launched the D-Euro program.
Central banks pressured by decrease in cash
However So far the response to the ECB’s plan has not been as enthusiastic. Only 15 European countries are participating in this plan. It is estimated that a few years will still have to pass before the digital euro or the dollar become widely used currencies in commerce and daily life.
But central banks have felt pressure to accelerate their plans as consumers in the US and Europe continue to abandon the use of coins and physical banknotes.
Digital payments through credit or debit cards and digital cards from mobile phones continue growing at an impressive speed. All seven central banks, excluding China, including the ECB, the US Fed, and the Bank of England, addressed the issue of “retail” CBDCs for public use.
They said that digital money from central banks should take advantage of the participation of people and public and private entities to achieve a better adaptation to current payment systems.
They highlighted that smart contract technology must be complemented with existing national payment systems. Central banks advised to draw up strategies for the adoption of digital currencies that adapt to the economic conditions on the ground.
Development of the digital Euro
Development of digital money projects in Europe.
Issuers from Europe and the US are working on this project alongside Bank for International Settlements ( BIS ). For its part, in the development of the digital euro, the ECB is working together with Nexi, the Italian payments giant.
Nexi CEO Paolo Bertoluzzo announced at the end of September that he was “contributing to the design” of the European digital currency. The ECB had already outlined plans in July to start testing a digital version of the euro. Not to replace cash but as a complementary payment instrument.
“We are committed to the European Central Bank and contributing to the design of the future euro digital because we believe it can be a positive force in the evolution of digital payments ”, said Paolo Bertoluzzo, CEO of Nexi.
The authorities monetary authorities said that it is necessary to give the financial system time to fully adapt to the CBDC. They warn that problems with banking customers could arise if the new technology is imposed abruptly.
“Regardless of the design, develop and execute a CBDC system would be an important task for a central bank ”, expressed the seven central banks in the document. They emphasized that the participation of private operators should be closely monitored to give guarantees to people about the use of this technology.
Of all European countries that are most advanced in their digital currency programs are Sweden, Lithuania and Ukraine.
CBDC is backed digital money
CBDCs are issued and backed by central banks, just like physical fiat money. Contrary to cryptocurrencies that do not have any support and are managed by private actors, except digital currencies such as Tether (USDT), whose value is anchored to the dollar.
Central bank digital currencies should not be confused with electronic money. This type of money used daily throughout the world in countless transactions through commercial banks, is nothing more than an electronic expression of traditional fiat money.
So far, with the aforementioned exceptions of Sweden and the Bahamas, the People’s Bank of China is the one that has advanced the most in the development of a digital currency compared to all the other major economies in the world. The digital yuan will have its biggest test at the upcoming 2022 Beijing Winter Olympics.
Commercial banks concerned about retail CBDC
As well as the Central banks are concerned about the development and expansion of cryptocurrencies, commercial banks are also concerned that CBDCs focused on retail trade end up cannibalizing their deposit bases. Therefore, they try to have some influence on its design.
The issuing agencies have promised to seek that the threat of the CBDC on the retail trade is minimal. Specifically in private banking business models.
“Our analysis suggests that the impacts on bank disintermediation and loans could be manageable for the banking sector,” they stated. They indicated that if there is any impact, it is probably limited in the “plausible” levels of adoption.
According to what is known so far, the technology that supports the digital euro is still very conservative. It looks more like a PayPal account than a blockchain wallet. In France the pilot programs around the D-Euro are advanced, while in Germany, Europe’s largest economy, the project is viewed with skepticism.
Note: This article has been indexed to our site. We do not claim ownership or copyright of any of the content above. To see the article at original source Click Here
