• Central Bank Digital Currencies (CBDCs) are slowly becoming a reality and 100 countries are reported to be exploring the concept in some form or the other.
• Project Rosalind, Ripple’s collaboration with Colombia’s central bank, and other initiatives demonstrate that CBDCs have emerged as a powerful indicator of blockchain technology’s increasing importance.
• The privacy factor of CBDCs will ultimately prove to be the biggest bone of contention.
Central Bank Digital Currencies (CBDCs) are slowly becoming a reality. Despite not yet being rolled out full-fledged, these digitized versions of legal tenders appear to be inevitable. To date, 100 countries are reported to be exploring the concept in some form or the other.
Project Rosalind – a CBDC initiative with the Bank of England, conducted jointly by BIS Innovation Hub London Centre – developed 33 API functionalities and successfully explored more than 30 retail CBDC use cases covering a broad range of domains for both individuals and businesses. Similarly, Ripple teamed up with Colombia’s central bank (Banco de la República) to pilot its own version of CBDC. These recent events demonstrate that governments around the world are taking blockchain technology increasingly seriously; something which KuCoin believes will eventually go far beyond its initial perception as merely a fleeting craze.
The Privacy Factor
The privacy factor is likely to be one of the most contentious issues when it comes to rolling out CBDC networks on a large scale basis across different jurisdictions. Many experts believe that while digital currencies do offer numerous advantages over traditional counterparts, they also come with their own set of risks such as lack of privacy due to increased surveillance from government authorities.
Benefits & Risks
As with any new technology, there is always an element of risk involved when introducing something revolutionary into existing systems; particularly those related to finance and money supply which can cause instability in economies if done incorrectly or too quickly without proper consideration for all stakeholders involved. On the flip side however, digital currencies could reduce transaction costs significantly by eliminating middlemen completely from certain processes – making them faster and more efficient – while increasing transparency within financial systems thanks to immutable ledgers used on blockchains which keep records secure and tamper-proof.