This article was first published on Insights – Ripple
Unsurprisingly, the pandemic has driven many of us to rely on digital forms of payments over cash. In fact, 25% of US consumers use less cash now than before March 2020. Additionally, government policies around the world are now pushing towards digital currency adoption to foment contactless payments. For example, China’s central bank branch is looking to eliminate banknotes from certain sectors. But without cash payments, what will be the alternative for central banks?
Enter – Central Bank Digital Currencies (CBDCs).
The Rise of CBDCs
A CBDC is the sovereign equivalent of private cryptocurrencies and digital assets, issued and controlled by a country’s Central Bank and used by people and businesses for retail payments. The overall mission of CBDCs is simple: to move money like information. To stay on top of today’s constantly evolving digital market, central banks must actively review the pros and cons of offering a private digital currency in their region. In fact, 86% of central banks¹ are already investigating potential CBDC adoption, with over half already progressing from research to pilot projects.
China has started trials of e-yuan currency, with a proposed launch date of February 2022. European officials want to launch a digital euro by 2025. The Bahamas has put its version “the sand dollar” into circulation². The United States announced it is exploring a U.S. digital dollar³, a tokenized version of the dollar we know.
This form of private cryptocurrencies is playing a critical role in the new, global financial infrastructure that blockchain technologies underpin.
Some of the key benefits of CBDCs:
- Enhance existing payment system by increasing the speed and efficiency of payments while reducing costs and failure rates.
- Promote financial inclusion to increase access to financial services for under and unbanked populations.
- Encourage greater competition by ...
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