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Central banks don’t need digital currency
Implementation of CBDCash will strengthen the monopoly of banks and control users’ wallets
Countries Prepare for CBDC Implementation
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Central banks are so intimidated by the proliferation of anonymous and private cryptocurrencies that they are ready to launch their own digital money. At the same time, not a single head of the Central Bank fully understands why the country needs CBDCs. Paper bills and coins may remain in the past due to a new financial instrument – digital currency of central banks (CBDC). As of … More
Need digital cash instead of CBDC
Lars Christensen, an economist and researcher at the Copenhagen Business School, is confident that central banks still do not understand why they need digital money (CBDC), which, in fact, will act as the equivalent of ordinary fiat currency. He announced this on his Twitter page, where he detailed his vision of the problem..
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According to Christensen, central banks are striving to satisfy consumer demand for electronic money. During the pandemic, electronic payments increased several times, but not all banks were ready to process such a number of transactions. Christensen believes that a central bank digital currency (CBDC) is not needed to solve this problem. He suggests using digital cash (CBD Cash).
The expert suggests switching to a completely electronic system of payments between users and banks. To do this, every citizen, entrepreneur or company must register their electronic wallet, which will receive bank funds during a money transfer. At the same time, banks should not charge a transfer fee, or it should be practically zero. The users themselves can exchange electronic money for other currencies or cash them out at ATMs..
Christensen believes that the emission of electronic money should be controlled, so the process of generating cryptocurrency can be taken as a basis. But the amount of the issue will be determined exclusively by the Central Bank.
This approach, according to the expert, will allow banks to improve the monetary policy of states, as well as reduce inflation by reducing the amount of paper money in circulation..
Banks will get a monopoly again
Monetary economist and historian George Selgin is confident that the use of the CBD Cash mechanism will give the Central Banks an absolute monopoly on the market, and the introduction of electronic wallets will also help officials control money and block users’ wallets.
At the moment, neither experts nor the Central Banks themselves have come to a consensus on the account of CBDC. Nevertheless, the Central Banks are actively working to develop a digital currency, and some countries are already testing the created CBDCs..
So, Japan has already begun testing its own digital currency. And a number of countries, such as Turkey, Germany and others are actively developing.
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China remains the undisputed leader in this process, which has already completed testing the digital yuan. Russia is still eyeing CBDC and is in no hurry with the introduction of the digital ruble.
How the Russian economy will change if the CBDC is created and launched on the market, read here.
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