CBDCs and their role in e-commerce
By the standards of the cryptocurrency world, central bank digital currencies (CBDC’s) have been talked about for a long time. In 2017, Chile’s central bank governor spoke about CBDCs, but did so with cautious skepticism, arguing that it would take many years to implement them. As early as January 2020, the Bank for International Settlements published a report that said that around 80% of central banks are looking into CBDCs.
The existing paper monetary system is now undergoing a serious crisis — inflation rates are enormous. People are looking for alternatives to preserve capital, including finding them in cryptocurrencies as a way to protect against the depreciation of fiat money. However, there are a number of problems here.
Firstly, cryptocurrencies are very volatile and not everyone is comfortable working with such instruments. You can go to bed and in the morning find that your money has risen or fallen in value by 10 percent or more.
Secondly, cryptocurrencies require a fairly complex infrastructure in order to function adequately. So far, it is inconvenient to just take and buy a loaf of bread in the store for the crypto. However, some companies are already starting to create solutions for making payments from crypto to fiat upon payment.
Third, central banks and governments do not want to lose their power associated with the monopoly on the emission of money operating in their country. As already recognized: who owns the money — he controls the world.
CBDC’s are committed to addressing these issues. In a sense, CBDC is a countermeasure that central banks and governments cling to to keep up with the times and at the same time prevent decentralized chaos. CBDCs are not cryptocurrencies, they are anti-cryptocurrencies. Moreover, CBDC can compete with deposits on the accounts of commercial banks, although the Chairman of the Central Bank of the Russian Federation Elvira Nabiullina, speaking of the “digital ruble”, is trying to convince that CBDCs are primarily created to combat the spread of cryptocurrencies.
What are CBDCs?
Central bank digital currencies are not very different from regular cashless payments. This type of digital currencies may or may not use distributed ledger technology, or even work on one or two servers of the same Central Bank. While the registries of Bitcoin, Ethereum and other decentralized cryptocurrencies are maintained by tens of thousands of server computers around the world.
There are three main features of CBDC:
1.Currency is digital only
2.Currency is issued by the central bank as an additional form of money
3. Currency is a universally available means of payment
How will the introduction of CBDC affect the market?
Central bank digital currencies promise to be easier to use, but citizens will have much less power over their money. Transactions will be easy to track, transfers and accounts will be easier to block for criminals and dissidents. CBDCs are likely to have fast transaction speeds and low fees, and are simple and easy to use. They will also be convenient when it comes to tax supervision, accrual of fines and combating money laundering — many key functions can be easily automated here. Finally, CBDCs will speed up international settlements several times over.
CBDC will strengthen the position of central banks and weaken the position of private banks, which, in turn, will only be “applications” for moving CBDCs between clients, who will receive transaction fees. CBDC will be offered as an alternative to cryptocurrencies, however, due to their centralized nature, they will not be able to occupy this niche. They will also be promoted as an alternative to cash, especially in connection with COVID-19, when cash is already recognized as one of the main sources of the spread of infections. The inclusion of digital money is more environmentally friendly than paper money and cannot be lost, destroyed, counterfeited, etc.
Whether you like the idea of CBDC or not, this is a trend to prepare for. Virtually every central bank has a working group to explore the benefits of CBDC. It is very difficult for most cryptocurrencies to become more than just a speculative instrument, while CBDC will simply establish itself as a widespread means of payment.
In countries where central banks are tolerant of cryptocurrencies and allow banking transactions with them, CBDCs can strongly crowd out private stablecoins, which, in turn, can be based on fiat currencies of other countries, which is a counterbalance to the local monetary system.
As you can see, the consequences of the widespread introduction of CBDC will be very many. In turn, we understand how important it is to prepare for the new market conditions of the digital world.
Barter Smartplace is a marketplace for barter trading in commodities, currencies and digital assets that is ready to support and implement CBDCs of different countries on the platform for settlements between buyers and sellers to facilitate the trading processes of borderless trading of the future.
We are ready for the new digital economy, are you?
p.s. Let us remind you that yesterday we updated the main site of our company barter.company — see right now how we position ourselves in the new market realities.
Also, the launch of the updated Smartplace is expected every day! In order not to miss the opportunity to register as one of the first and feel the freedom of decentralized trading, join our social networks.
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