Status Quo and Future Applications of CBDCs

Opinions Summarized from an Episode of BSN’s Podcast Long Story Short

Central Bank Digital Currencies (CBDC) are the digital form of legal tender. CBDCs are centralized, issued, and regulated by the competent monetary authority of the country.

The development of China’s national digital currency DCEP, started in 2014. At the end of 2017, the State Council of the People’s Republic of China sanctioned the People’s Bank of China (PBoC) to lead the research on DCEP. Basically, DCEP, which is pegged to the RMB in a 1:1 ratio, is poised to become a digital version of the Yuan. The issuance and distribution of DCEP will be based on a two-tiered system. The PBoC will issue DCEP to the appointed operational institutions such as state-owned banks, and then these institutions will distribute DCEP to the retail participants. DCEP will support general accounts, which means that every unique identification can create a DCEP account, and in the meanwhile, it will have obligated acceptance and controllable anonymity.

In a recent BSN China’s podcast “Long Story Short,” BSN and its partners had an in-depth discussion about the status quo and future applications of CBDCs. This episode was co-hosted by BSN and Chain DD (

All guests engaged in the discussion are specialists in blockchain technologies and financial investment. In addition, all of them have participated in the research and adoption of CBDCs and stable coins.

Opinions from panelists are shown in the following paragraphs.

Michael Wu, CEO of Amber Group:

As Crypto Finance 2.0 era begins, CBDCs are more than the digital version of cash and coins. Central banks adopt this new money architecture to new digital business realities. CBDC is getting increasingly significant in general crypto assets because of its scalability and programmability, allowing broader applications of use cases for enterprises and individuals, in contrast with traditional fiat currencies.

Speculations about CBDC right now will continuously diminish as long as the backend infrastructures and financial regulatory systems evolve. In the future, all banks and financial institutions will absolutely undergo a transformation to technology companies.

Sean Lee, CEO of Algorand Foundation:

At present, whether it is led by state governments or foundations lead, CBDCs have a unified purpose of increasing efficiency and improving transparency, with the consideration of regulatory compliance. All countries are working hard on CBDCs, but the United States might not necessarily need to create its own CBDC. At the moment, stablecoins such as USDC is sufficient to meet the demand. However, the U.S. has more time to learn and emulate other countries’ solutions, such as the DCEP. The U.S. should come back to the leading position after making new regulations to adapt to the quickly changing payments space.

Feifan Li, CEO of ChainDD:

The Federal Reserve Bank and the Federal Savings Association can adopt stablecoins for settlement, using public chains to validate, store, keep, and settle accounts. Up to the present day, the U.S. never officially announced that the U.S. wants to create a CBDC backed by USD, but USDT, USDC, and DAI are regulated stablecoins that banks and financial institutions are allowed to back their payments, settlements, and transactions.

It is unnecessary to issue a CBDC if the federal government can contain all participants in the crypto market under a tracible regulatory system. Taking advantage of existent market-orientation, stablecoins pegged to USD would be rapidly spread to the whole world where USD can circulate.

In the future, if CBDC wants to reach its expected scalability, it should be thinking beyond the current banking system (electronic wallets are linked to bank accounts), which is essential at the moment for all electronic mobile payments. It is inevitable for financial institutions to undergo a technical transformation because assets should flow to more valuable, secure, and controllable places. However, all mainstream banks will change to the second-tier distribution intermediaries of CBDCs, and they can develop more derivative financial products.

Yifan He, CEO of Red Date Tech:

CBDC has three following characteristics:

1) It must be anonymous or tolerance of a certain level of anonymity.

2) Its transactions should support peer-to-peer payments instead of passing intermediaries.

3) It should be able to freely flow within the law but not under the control of any other organization or individual.

There is still a need for central banks to study, accommodate, and promote CBDCs’ adoption in the next five to ten years. During this process, stablecoins could be backed by fiat money and circulate on a large scale. With the development of CBDCs starting from electronic payments, personal assets will eventually have 100% security, privacy, and market liquidity. All transactions will circulate and exchange freely worldwide within the law without any intermediaries.




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