Are countries ready to implement CBDC – expert opinions

CONTENT

  • Can digital currencies replace fiat money?

  • China remains a leader in the digital economy

  • The introduction of digital currencies can negatively affect the country’s economy

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Recently, the Chinese government announced an airdrop of its own digital currency (CBDCBills and coins may be a thing of the past due to a new financial instrument – Central Banks Digital Currency (CBDC). As … More). Earlier, ECB President Christine Lagarde also announced the need to create a digital euro, which could be a supplement to fiat money. The United States, Turkey, Germany, Spain, as well as Russia and Ukraine announced the creation of CBDC. BeInCrypto asked the experts if the countries are really ready for the implementation of digital currency, or if it is rather another hype.

Pavel Shkitin, CEO of crypto exchange Nominex

– I cannot say that the countries are 100% ready for the introduction of digital currencies of central banks, but the preparation process is underway. The flagship in this matter, of course, remains China, which not only created and implemented its own digital currency, but also pays salaries in it and even conducts an airdrop. But it’s too early to talk about the widespread use of digital currency.

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The banking system in the world has been built for centuries, so it will definitely not be possible to change it in a few years. After all, in fact, it is necessary to change the entire existing work of banks, introduce blockchain, train thousands of specialists to work with new technologies. Of course, the first attempts to introduce digital currencies are being made by the European Central Bank, the People’s Bank of China, and the US Federal Reserve, but it is too early to talk about the full adoption of digital currencies. In my opinion, digital currencies of central banks will not replace fiat currencies in the next 5-10 years, but they can become an addition to them. Approximately the same thought was expressed by the President of the ECB Christine Lagarde.

The introduction of digital currencies will significantly speed up and reduce the cost of international and domestic payments. In addition, the availability of digital currencies will significantly reduce the cost of servicing fiat money. Imagine that national governments spend millions of dollars making and maintaining fiat money. If the number of paper bills is reduced by at least half, then this is a significant savings for the state treasury..

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Secondly, the introduction of blockchain technologies will help eradicate corruption. Already, countries such as Kazakhstan, Turkey and a number of others have considered the option of introducing digital currencies with a single purpose – to make transactions of funds transparent and thereby eradicate corruption in the highest echelons of power.

Now about the cons. The main disadvantage is the low culture of understanding blockchain technologies and digital money. The most striking example is Venezuela. The government of Nicholas Maduro introduced the Petro cryptocurrency in the country and even began to use it instead of the depreciating bolivar, but did not teach the population to use digital money. As a result, more than half of the country’s residents could not even install and activate a crypto wallet. Therefore, if countries are seriously thinking about the introduction of digital currencies, then today it is necessary to conduct training and tell how to use them..

George Goncalves (What Is Yield Curve Telling Us? Deflation Or Stagflation? More Central Planning)

Ultimately, all countries in the world will sooner or later come to use digital currencies. The question is that the countries that will take the lead in this matter can make their digital currency global, as the Facebook team seeks to do.In June 2019, Facebook announced preparations for the release of the Libra digital currency. The social networking project immediately attracted attention … More. It was Mark Zuckerberg’s statement on the creation of the stablecoin Libra.In June 2019, Facebook announced preparations for the release of the digital currency Libra. The social networking project immediately attracted attention … More prompted the leaders of the countries to work on creating their CBDCs.

In fact, the first globally accepted digital currency can replace the dollar in the world market and become that very “hard currency” for all users. And while China is leading in this matter.

Gleb Kostarev, Director of Binance in Russia and the CIS

– A 2019 study by the Bank for International Settlements (BIS) found that nearly 80% of surveyed central banks are involved in full-scale CBDC research, and various experiments are already underway. Pilot projects have already been launched. Sweden’s central bank, Riksbank, has launched a pilot e-krona due to the long-term decline in the use of cash in the country.

In Uruguay, Banco Central del Uruguay (BCU) also piloted one of the first general purpose CBDCs targeting retail.

The National Bank of Ukraine (NBU) successfully tested e-hryvnia in 2018.

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Bank of Canada is one of the few central banks that has been actively researching CBDCs since 2016. In early 2020, he concluded that the bank did not yet see “compelling” reasons for issuing the Canadian digital dollar..

The Bank of Japan has officially launched a CBDC study with five other major central banks in 2020. In July 2020, reports emerged suggesting that the Japanese government will incorporate a CBDC implementation plan into the country’s future policy and will further develop this initiative..

Most likely only a small group of central banks will be able to fully implement CBDC and issue digital currency within the next 5 years.

The progress of CBDC implementation and adoption will continue in a gradual but slow manner. It is worth noting that the positions of many central banks and their attitude towards CBDCs have changed and regulators have become more receptive to innovation, especially in terms of research and knowledge sharing with participants in the digital asset market..

The issue of CBDC implementation is more likely not about technologies, they exist, but about the necessary condition of social coordination and adaptation between all stakeholders, in particular society and the state..

Jack Tao, CEO of Phemex cryptocurrency exchange

– Technologies are developing much faster than society. As in the case of bitcoin, I would not expect the full adoption of the digital form of money on a massive scale in the near future, since not all countries and inhabitants of the world have this technology. CBDC will require the creation of additional payment infrastructure. In my opinion, fiat will still survive, but digital currency can be an additional form of money along with cash and non-cash payments.. 

Ideally, the CBDC should serve three functions of money, including store of value, unit of account, and medium of exchange. As far as I know, the European Central Bank has also indicated that the digital euro will not replace cash, but supplement it. Digital currency is also designed to fulfill functions that can facilitate integration, especially for those who for one reason or another do not have a bank account.

China may gain control of global CBDC standards. China’s digital yuan initiative is moving at an incredibly fast pace as the Chinese government appears to be aiming to become the first global jurisdiction to adopt a CBDC. This advantage sets the standards for the development of schemes, because it is the technological platform of the pioneers that will contribute to the further widespread adoption of the digital currency..

For China, the momentum behind the country’s already strong CBDC comes from already tested domestically private sector e-money wallets such as Alipay and WeChat Pay. It is likely that soon the whole world will know about them..

Unlike China, Sweden and other advanced central banks, the Australian government is reluctant to issue CBDCs. There is also logic in this, as CBDC can have serious disadvantages for the country, including higher financing costs for commercial banks. CBDC may increase the likelihood of a banking system massacre in the event of a financial crisis.

It should be understood that more than one technology is meaningless without its correct implementation. In this case, we can say that the success of the CBDC will also depend on how willing the society is to use the digital wallet. In Asia and Europe, there has been an active reduction in the use of cash for several years, while in the US there is still speculation about how far the horizon is for promising currencies such as Libra, and whether they will become valid. US Citizens Seem To Oppose The Digital Dollar Even With Concerns About The Current Financial System.

In China’s view, global financial dominance is at stake. I don’t know if the yuan will be able to overthrow the dollar, but I do know for sure that in the foreseeable future, clients will stop doing business with a traditional fiat bank if it does not provide them with access to a digital asset..

Dmitry Volkov, Technical ‌‌Director of ‌‌International‌‌ Cryptoexchange‌ ‌CEX.IO:

– In different countries, the situation with the introduction of national digital currencies is different. At the moment, the leader in testing the digital analogue of fiat currency is the People’s Republic of China, where in 2020 they started testing the digital yuan called DC / EP (Digital Currency / Electronic Payment), which means (digital currency / electronic payment ). Agricultural Bank of China, Industrial and Commercial Bank of China, Bank of China and Construction Bank of China, the largest banks in the country, took part in the testing.

Four Chinese cities were accepted for internal testing: Suzhou, Shenzhen, Chengdu and the new Xiong’an district in Hebei province. The central banks of the United States, the United Kingdom and Japan have also said they are looking into creating a national digital currency. For the United States, the main incentive in the development of the digital dollar is most likely China’s leadership in this area, which in the future may give an advantage to the main geopolitical rival of the states..

The rest of the central banks are currently considering the possibility of creating digital currencies, primarily for reasons of technological competition, since many central banks are not yet convinced of the feasibility of this technology. For example, Tony Richards – the head of payments policy at the Reserve Bank of Australia – said the bank had assessed the CBDCs and found no convincing case for their introduction in the country. The Swiss government made a similar announcement, saying that Switzerland will not receive any dividends from the creation of a state digital currency at the moment and may instead receive only risks to financial stability..

It is expected that, in general, digital currencies will serve as a digital means of payment without an interest rate. Otherwise, the interest rate of the digital national currency would affect the fiat currency, which would lead to an interest rate conflict between the digital and fiat currency. And such an ambivalence of rates is in no way acceptable for state financial regulators..

It is difficult to talk about the specific benefits that could be gained by a country that was the first to implement a national digital currency. Much here will depend on the prevalence of the state currency in the world and its participation in the world economy. But at the moment, we can talk about China’s technological leadership in this matter..

As for the problems that the creation of such a currency could lead to, they are unlikely to be expected, if only because the central banks of the countries at the conceptual level will not allow any negative impact of digital currencies on the financial system and economies of their countries..

The reasoning about this now can be compared to the hypotheses about the price of bitcoin, which were built in 2017. You can compare this with the space race of the mid-20th century, in which the USSR eventually won.. 

But now I don’t see much sense in building predictions for winning the race, because even many central banks have not yet decided on the launch of central national digital currencies. And at the moment there are no obvious dividends that central banks could extract from their leadership in this area. Rather, the successful implementation of such a project may be evidence of the sufficiently high technological capabilities of a particular country..

Sergey ‌Khitrov, ‌ ‌Founder‌ ‌&‌ ‌CEО‌ ‌Listing.Help‌

Are countries ready to implement CBDC - expert opinions

– Currently, a number of countries declare their readiness to launch or officially test digital currencies: the People’s Bank of China has a project to create a digital yuan, and the Central Bank of France is testing the possibilities of both a national digital currency and proposes to create a single one within the EU. US Federal Reserve, Bank of England and Bank of Japan are exploring the application and development of this technology.

Most often, the issue of introducing digital currencies is considered in the light of news about the “digital yuan”. It is in China that the digitalization of the economy has already reached a high level. In this vein, Glen Wu, head of the Ledger Vault division, points out that digital currencies can easily replace fiat currencies: the average user will not understand that something has changed at all in his daily purchases through WeChat and Alipay. “It will be organic. Nobody will feel the difference that payments will be already in CBDC ”.

In countries with less digitalization of the economy, digital currencies are likely to be an addition to existing currencies during a certain transition period. However, it is the implementation of such initiatives that will allow countries to modernize entire sectors of the economy..

The first country to introduce its own digital currency will face major technological challenges: no amount of testing can predict the operation of the system when it is used by an entire country. The operation of such a digital currency should be significantly protected from hacker attacks, and its code will become the object of state sovereignty..

On the other hand, the opportunity to be the first country opens up wide opportunities for the modernization of industries and entire regions of the country that were previously outside the field of modern digital technologies..

In technology, race and competition always have a positive effect on the product for end consumers. I think we will see a versatile and convenient solution that can make life better. But it will take years to determine the exact direction of development of these developments and leaders.

In addition, such a race of central banks can seriously affect politics: the introduction of a fundamentally new architecture of money will be a big challenge to the modern economic system. That is why the issue of CBDC implementation is often discussed in the context of the confrontation between the “digital dollar” and “digital yuan”. It is also for this reason that more and more often you can hear proposals for a single CBDC based on the currencies of the PRC, Korea, Japan and Hong Kong, or the emergence of a single digital currency for the euro area.

Sergey Zhdanov, COO, EXMO cryptocurrency exchange

– Most countries are only at the stage of discussing how expedient it is to issue cryptocurrencies at all. Although, on the other hand, almost all countries are involved in the implementation of CBDC. Of recent announcements, only Australia has decided to abandon such a project for the foreseeable future. Canada has previously made similar statements. And even in the Czech Republic, representatives of the National Bank expressed themselves extremely skeptical about the purpose of CBDC.

Nevertheless, some states are already developing and testing their own digital currency. Among them there is one clear leader – China, which is in the final stage of testing its crypto-yuan. Recently, they launched a program to distribute 10 million digital yuan to the population for the purpose of testing and, at the same time, regional development. The news attracted quite a lot of attention. But even earlier, the country began to pay salaries in digital currency..

In addition, during the entire 2020, 6,700 use cases of the crypto-yuan were tested, payments were made at the interbank level. But even the Chinese government did not indicate the exact timeframe for the full implementation of its CBDC, but only promised that the digital yuan will be used at the Olympic Games in Beijing in 2022. China’s financial regulator has been working on creating a digital asset for several years. During this time, a large number of … More.

It is noteworthy that a number of other Asian countries reported progress in the development of their CBDCs. In particular, South Korea, Thailand (testing in partnership with large companies), Cambodia (promised to launch this fall). Probably, many Asian countries feel more pressure from their large neighbor, which spurs them on to actively develop their own digital currencies. So, in July, against the background of news on CBDCs in China and South Korea, the Japanese government transferred this direction to a priority.

Compared to Asia, it seems that the countries of Europe and North America are lagging behind: mainly discussions are underway about the need and how this should be implemented, what opportunities the state will receive from CBDC. There is also active work on the legislative definition of the work of CBDC. It seems that Western countries are ready to use existing commercial developments to launch digital currencies, in contrast to China, where a state blockchain network was created for this..

From countries in other regions, the Bahamas Central Bank also announced the start of a gradual release of CBDCs. It was already called October of this year. In any case, all countries are essentially talking about continuing testing or implementation as early as next 2021. The ECB, in particular, noted that it was about several years of preparation. So in most countries, the launch and distribution of CBDC will not begin until 2022, and possibly even later..

Most likely, it will develop differently in different countries. The idea of ​​a cashless society is not new, and it does not get a positive response everywhere. The extent to which the use of digital money will take root will depend on both sufficient technological development and economic benefits that a business and an ordinary user can receive, as well as on the peculiarities of the mentality and perception of CBDC as a phenomenon in society … Technology gradually penetrates and spreads in all countries, but it happens at different rates. The same goes for CBDC. The digitalization of society has been in full swing in China for several years now. In particular, the rating system has caused a lot of controversy and discussion in the world, but within the country, citizens have accepted the rules of the game. So, most likely, the crypto-yuan will be normally accepted there..

On the other hand, there is the example of Venezuela, which released its cryptocurrency back in 2018. But against the background of the economic crisis in the country and instability, it did not receive support among the country’s residents. They chose to buy bitcoin whenever possible.

CBDCs can accelerate the speed of transfers, both domestic and international. This can simplify many processes, as well as speed up the country’s economy. In addition, the use of blockchain can make resource allocation more rational and transparent. In particular, it can prove to be a powerful tool in the fight against corruption and abuse of power. For China, in addition to convenience, the digital yuan is also an opportunity to reduce dependence on the dollar in international trade, as well as to strengthen its position, at least at the regional level, by transferring settlements from the dollar and traditional international payment systems to the Chinese CBDC. In essence, it is a competition for financial dominance in the world. But this struggle only concerns countries with powerful economies..

First of all, China, the United States and the European Union. Also, to a certain extent, Great Britain, Japan, South Korea and a number of other developed countries. For many countries, everything will depend on whose zone of influence they find themselves in. Last year, various groups of countries discussed the possibility of launching regional cryptocurrencies for settlements between neighboring countries discussed. For example, there were talks about a single Muslim cryptocurrency, a single cryptocurrency in the Eurasian region and between the BRICS countries.

Nevertheless, in such projects, everything can lead to the adoption of a ready-made cryptocurrency of a certain country in this community. Alternatively, the same digital yuan. These projects include the digital euro..

There is no race in the literal sense of the word in this direction. Yes, in many countries the process has been launched, but mostly a detailed study of all aspects is underway before launching. On the other hand, there is a certain nervousness in the statements of some government representatives. It is difficult to predict exactly how it will end: we are now living in a period of enormous uncertainty, which is caused by crisis phenomena in many (if not all) spheres of human life. But we also live in a time when a completely new financial system of the world is being formed, in which digital money will become an integral part..

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Are countries ready to implement CBDC - expert opinions
Are countries ready to implement CBDC - expert opinions
Are countries ready to implement CBDC - expert opinions
Are countries ready to implement CBDC - expert opinions

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