By
Chimamanda U. Martha
April 18th, 2024
The report also suggested that countries that implement a nationwide CBDC first will have an early advantage in influencing how their local currency fares in international markets and trading.
According to a new report by Deloitte, Bitcoin (BTC) has the potential to serve as the base for a cheaper, faster, and secure environment for electronic fiat currency or central bank digital currency (CBDCs).
The latest analysis from the financial service giant, titled ‘State-Sponsored Cryptocurrency’, highlighted the need for a complete overhaul of the traditional fiat ecosystem to solve impending issues of being “slow, error-prone and expensive relative to performance in other high-tech industries.”
The report from Deloitte however identified five vital areas where Bitcoin can significantly improve traditional fiat currency, speed, security, efficiency, cross-border payments, and collaboration with other payment participants.
“With the capacity to do so without relying on a centralized entity for day-to-day operations, whether commercial or federal, the effect might be really transformative,” the report stated.
The report also suggested that countries that implement a nationwide CBDC first will have an early advantage in influencing how their local currency fares in international markets and trading.
Whiles highlighting the differences between BTC and State-issued CBDCs, Deloitte’s analysis stressed one of the major inflationary characteristics of fiat currency and stated that CBDCs have no limit on the amount of money stored on the ledger and that the value of the CBDC can be set by centralized governments.
According to Deloitte, crypto exchanges in the near future would continue to serve as a facilitator, converting ‘users’ cryptocurrency to paper currency when trading across different currencies and charging an exchange fee in return.” In this scenario, banks will only act as custodians of the distributed ledger, vying with other miners to process transactions and collect the reward.
The report concluded by noting that, while CBDCs will not totally replace Bitcoin and other cryptocurrencies, their mainstreaming will give customers another option for selecting the most appropriate method of payment.
“Bitcoin could ultimately spawn a series of new opportunities that would transform the current payments system into one that is faster, more secure, and less expensive to run,” the report read.
While many governments have joined the race to implement in-house CBDCs, universal adoption is however one of the most important conditions for their success. To encourage wider adoption, Jamaican Prime Minister Andrew Holness declared that the first 100,000 Jamaican people who utilize the country’s CBDC, Jam-Dex, will receive a free $16 payment.
According to reports, approximately 17% of the Jamaican population is unbanked, and as such, the Jamaican government, through the launch of CBDC, plans to encourage low and middle-income citizens to join the national banking system.