At a time when enterprises are moving fast toward the adoption of blockchain technologies, central banks are exploring digital currencies as an alternative to replace their cash in circulation. A Central Bank Digital Currency (CBDC) is the digital form of fiat currency. Not to be confused with cryptocurrency, CBDCs are different in many ways as they are regulated by the government, monetary authority, or law. As it is backed by the government, a central bank can establish a CBDC account instead of printing the money.
Implementation of CBDCs By Central Banks
There is an ongoing argument over cryptocurrency regulations, given that central banks need to develop their own digital currencies. Central banks are now assessing their strategy of testing and implementing CBDCs using the distributed ledger technology. As a result, the central banks have accelerated pilot testing, and research and development worldwide.
Pros & Cons of CBDCs
There is no denying that we are living in a world where electronic transactions are taking over the cash usage. Additionally, several possible threats involved with electronic transactions and global crisis like the Covid-19 pandemic have pushed central banks to develop their own digital currencies. We will discuss the pros and cons of CBDCs one-by-one.
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