It isn’t new that Central banks have negative views towards digital currencies. Though the interesting part is that they view central bank-issued digital currencies (CBDC) the same way. Earlier this month, Masayoshi Amamiya, the deputy governor of The Bank of Japan (BoJ) fully supported his negative stance from earlier this year. In April, the governor spoke negatively about the effects of CBDC on the current financial system. Amamiya’s view is shared by many central bank operatives from around the world. The concept of CBDC or national cryptocurrencies has been discussed many times. A lot of governments across the world have debated on the pros and cons of this practice. Some governments even came up with their own virtual currencies, while others are still researching the effects. Venezuela issued their own Petro, others like Japan for instance, have entirely dismissed the idea.
Even Banks don’t like CBDC
CBDC are simply national digital currencies. They are digital currencies, issued and controlled by a regulatory body. This means that they are 100% controlled by the government. Unlike most cryptocurrencies, CBDC are not decentralized. They simply represent fiat currency, but in a digital form. Of course this means that the central bank, which issues the CBDC becomes the regulator and the client’s account holder. Each CBDC unit is supposed to act as a secure digital equivalent to a paper bill. In most cases, it’s powered by distributed ledger technology (DLT).
CBDC are believed to be the next part of the financial evolution by many experts. They are largely a result of the ever-growing popularity of Cryptocurrencies, Blockchain technology and digital currencies. Seen as a logical response by central banks, CBDC were designed to take the “best parts” from cryptocurrencies. Namely the security and convenience, but also combine them with classical and trusted features of the traditional banking system. Switzerland is nicknamed “The blockchain capital of Europe.” It’s without a doubt one of the most blockchain and crypto-friendly countries in the world. Despite that, the country is still unsure when it comes to CBDC.
Earlier this year, Thomas Moser, the director of the Swiss National Bank, mentioned that despite crypto and blockchain being huge innovations, they aren’t advanced enough to be considered as a state-backed digital currency. Moser stated that in order for an innovation to reach the state of mass adoption, it must be better and cheaper than its predecessors. Of course there were counter-arguments by Swiss people. The chairman of the Swiss stock exchange SIX, Romeo Larcher, argued that if the central bank issues an “e-franc”, it would result in a lot of synergies. In turn these synergies will be extremely beneficial for the Swiss economy.
Banks are observing and waiting for the rigtht moment
In China CBDCs are nothing new under the sun. The concept has been researched for a while by the Digital Currency Research Lab. A lot of experts believe that a Chinese digital currency might be in development because the People’s Bank of China (PBoC), expanded the activities of the Digital Currency Research Lab beyond the capital. A new, extremely modern research center was created in Nanjing. Additionally, PBoC opened 4 positions for crypto-knowledgeable professionals earlier this month. The professionals are rumored to work on a secure data platform and a chip processor for crypto transations.
Japan is one of the few countries, which have publically discarded the concept, twice. Even though the country recognizes Bitcoin as an official means of payment, Masayoshi Amamiya has been very vocal about his doubts regarding CBDC. The deputy governor of the Bank of Japan (BoJ), has stated multiple times that there are no plans for CBDC development in the near future. Amamiya also explained that the country isn’t willing to eliminate fiat money even if there was a technological possibility for it. Cash is a very popular and reliable method in the country and in order to replace it, the replacement must be something out of this world.
Over in Europe, many officials decided to wait and observe the situation. Earlier this year, Mario Draghi, the European Central Bank (ECB) President, announced that there are currently no plans for development. He further elaborated that the technologies are not developed enough and require a colossal amount of testing before the ECB would even consider their use. However, he noted that the ECB is always carefully analyzing all developments and will take action if the right opportunity presents itself.
Iran is in a very unique position. Even though in April, the country banned all local banks from dealing with cryptocurrencies, the government minister shared that an experimental model of a national cryptocurrency was under development. He also stated that the country’s central bank will not prohibit or restrict the use of the national digital currency. There were rumors that Iran and Russia would start using their own cryptocurrencies in order to avoid the United States sanctions. The head of the Iranian Parliamentary Commission for Economic Affairs, Mohammad Pourebrahimi, noted that cryptocurrencies are a very promising way for Russia and Iran to avoid the sanctions. He also stated that digital currencies can prove to be a solid replacement for the SWIFT interbank payment system.
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