Why Are Central Banks Trying To Create Their Cryptocurrencies?/2
Advantages and Disadvantages
Today we see a huge difference in how well certain payment instruments are known in different countries.
For example, Russians take full advantage of contactless payments such as PayPass, Apple Pay and others. Meanwhile, the Chinese have long been “paying with their faces” by QR codes and actively even on the subway. We see that US residents find the operation of Amazon Go stores safe and loved; they enter the store, buy only the products they want and go out, and the prices of the products they buy are automatically deducted from their accounts.
Digital currencies seem like a logical continuation of this evolution, but that’s not entirely true. Because unlike other payment instruments, cryptocurrency cannot be considered a tool that can complement the existing financial infrastructure.
For example, China’s version called Digital Currency Electronic Payment (DCEP), an independent digital currency, is managed exclusively by the People’s Bank of China (PBOC) under a centralized system and does not use blockchain technology.
When the examples are examined, we see that the money created by central banks is managed in a controlled manner from a central system and does not include the features of transparency and anonymity.
Unlike cryptocurrency, there is no assumption of anonymity in the use of sovereign digital currencies, and their value is as constant as physical currencies.
For this reason, it is not possible to say that the crypto money to be created by the central bank is crypto money as we know it today. Currently, the created national cryptocurrencies in use are not actually cryptocurrency and only use crypto technology.
For example, “Bitcoin” is not only a virtual currency but also an investment tool like gold. It is possible to reduce the market volatility and create a stable market due to the limited production of crypto money and the predictability of its introduction to the market. However, national cryptocurrencies are unlikely to give buyers a similar opportunity because the centralized structure will work similarly to a procurement system where the value is likely to be controlled by the relevant central banks.
As a result, no-custody, distributed, flexible, blockchain-based digital currencies can streamline national business and international business. National central coins can help simplify or automate taxation and fight corruption.
It can provide a platform for controlling property rights, integrating low-income people and creating value and jobs. The national digital currency benefits include greater financial involvement, reduced money laundering, and less financial crime.
Additionally, it can allow remittances from migrant workers to be transferred across borders more efficiently.
Considering all these advantages and disadvantages; Supported by the government, industry, and possibly even the IMF, this technology has the potential to become much more than just a money transfer system as fiat money.
Therefore, there are more chances that national cryptocurrencies will appear in the future.