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Cypherium CEO is a massive advocate for ensuring CBDCs are interoperable and he has developed a framework to ensure CBDCs achieve their full adoption and global innovation.
Central bankers around the world are more and more coming around to CBDCs, digital form of fiat money, mainly inspired by Bitcoin. Tech nowadays presents a convenient vessel through which they can shape the future of payments. That actually means that CBDC issuance is not so much a reaction to cryptocurrencies and private sector ‘stablecoin’ proposals, but rather a focused technological effort by central banks to pursue several public policy objectives at once. We spoke to Cypherium CEO Sky Guo, a founding member at the OMFIF Digital Monetary Institute, the global central banking think tank helping policymakers to navigate CBDC.
He’s been involved in a number of virtual roundtables with De Nederlandsche Bank, European Central Bank, Banque de France, the Digital Currency Research Institute at the People’s Bank of China and others.
Sky is a massive advocate for ensuring CBDCs are interoperable and, from these discussions, he’s developed a framework to ensure CBDCs achieve their full adoption and global innovation. Ensuring these new national fiat systems can communicate with their international counterparts as well as their domestic industries and wholesalers is essential.
Cypherium CEO: China Did Excellent Job with CBDC
We asked him what does think regarding China’s leadership in the crypto space with its digital yuan.
Cypherium CEO confirmed China is certainly leading the CBDC charge saying:
“They have done an absolutely excellent job of recognizing the importance of this new wave of technology, and accordingly they have dedicated a fair amount of resources to realizing their vision of a fully functional CBDC.”
He said that it is obvious China is far ahead of the pack in terms of adoption–something upwards of 90% of Chinese domestic transactions now being digital–but it “remains to be seen how this project will interact with a globalized international economy. China has proven over the last 50 years that their economic policies are key to their national success, and this seems to continue ringing true throughout the digital era.”
Talking about incorporating digital currency into everyday life, Sky agrees this has to include a number of balancing acts. He adds that governments will have to incorporate CBDCs into retail and wholesale situations while still allowing the legacy systems to continue. In most situations CBDCs will have to coexist alongside cash and private money remittances for wholesalers for quite some time, says Sky adding that the wholesale CBDCs should probably take a leading role in the adoption of the technology as a whole because those transactions are far fewer and more regulated to begin with. “Generally speaking, the best way to incorporate digital is through interconnected, capitalizing on the strength of our globalized economies,” he noted.
We also wanted to speak about CBDC possibility to be efficient way to fight inflation/deflation and other challenges that fiat money has. Sky agrees that there’s no doubt that CBDCs would make any economic policy much more expedient. As soon as policymakers decide to affect the economy, they would be able to do so in a much more efficient and inexpensive way. However, he stresses, inflation is ultimately the result of the policy. If a government decides to pursue MMT or QE, even with a CBDC, the result will likely be inflation.
UK Recognizes CBDC
As we all know, China isn’t the only one introducing its digital money. Over the last several years, the United Kingdom has been a reasonable governmental voice in the crypto space. Their financial policymakers, bankers, and public officials have noticed the internationally unifying potential of a non-government popular currency like Bitcoin to serve as a global reserve. Recently, though, they have articulated some hesitation around the onslaught of CBDC projects. CBDCs, they argue, are risky: they offer great opportunities in terms of innovation, efficiency, cooperation, etc., but their novelty and dynamism could destabilize traditionally stable economies.
Sky says this is a clear-eyed view of this technology.
“It is important to be wary of the risks involved in such a new, immense proposition. However, this skepticism can do little to stop the adoption of the technologies. China, the European Central Bank, and a number of other important national economic centers have announced clear intentions to adopt CBDCs. There is a competitive dimension to the implementation process that makes digital currencies seem somewhat inevitable. The UK is right to be hesitant as they develop theirs.”
Speaking about the role of blockchain in CBDC integration Cypherium CEO states that certainly CBDCs can be built upon blockchains owned and operated by the government, ostensibly working just as any other cryptocurrency might, save for particular public-interest specifications (combating money laundering while maintaining anonymity, retail vs. wholesale, etc.).
“Moreover, one of Cypherium’s most recent and most exciting new projects has been the development of our Digital Currency Interoperability Framework (DCIF). The Cypherium DCIF is a novel approach to the challenges facing the adoption of Central Bank Digital Currencies (CBDCs). Any attempt at digitizing public money will soon have to reconcile the many functionalities of national currencies not yet mandated by private-sector digital ledger technologies. A fully functional CBDC will have to interact with a wide range of private sector industries as well as other national economic systems, not to mention other digital currencies like Bitcoin and Cypherium’s mainnet. Cypherium’s Digital Currency Interoperability Framework enables these necessary connections.”
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