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Cuy Sheffield, Visa’s top executive, believes Central Bank Digital Currencies can be one of the most important trends of the next decade.
In the age of increasing proliferation of digital currencies, there has been a renewed emancipation by Central Banks across the world to develop ways they can regain financial authority. This emancipation has led to the increased development of Central Bank Digital Currencies (CBDC) across the world. Following this development, several experts in the cryptocurrencies and payment service industries have been commenting on the roles of digital currencies in revolutionizing the future of payments. Recent among these expert views is a Twitter comment from Cuy Sheffield, the genius behind Visa Inc (NYSE: V) crypto project, who thinks CBDC represents one of the most important trends in the future of payments.
1/ I'd argue that central bank digital currency (CBDC) is one of the most important trends for the future of money and payments over the next decade.
Regardless of anyone's personal views of whether it's good or bad, the reality is that global interest in it is not going away
— Cuy Sheffield (@cuysheffield) July 3, 2020
Existing digital currencies are already renowned for facilitating faster and cheaper transactions while removing the bureaucratic bottleneck of the financial institutions and central bank involvement. The subject of digital currencies is already a defining factor in the futuristic emergence of a global digital economy. Visa expert believes that CBDC development will go on regardless of anyone’s personal views on it.
Need for Central Bank Digital Currencies
When Bitcoin (BTC) came to limelight in 2009, the governments around the world were unable to approve the new digital currency because of its cryptographic nature. Transactions involving Bitcoin (BTC), shielded the identities of users which makes regulations difficult to enact. The concept of taxation, criminal checks raised a lot of ethical and economic issues that informed the initial resistance to the adoption of Bitcoin and subsequent altcoins, a factor partly at work to date.
As the years’ post-Bitcoin debut unfolds, the world became more open to digital currency transactions having seen the ease and financial autonomy the cryptocurrencies offer. As governments could not stop the growing widespread resort to cryptocurrencies, a different gameplan (CBDC) was pioneered by the Bank of England in 2017. From 2017 to date, the majority of developed countries are gradually joining the bandwagon of countries development their government-backed Central Bank Digital Currency.
Features and Importance of CBDC
Unlike existing digital currencies, the government-backed cryptocurrency or token will not run as a decentralized system, this will help to maintain central control of the supply and regulation of the currency. CBDCs generally will be a digital version of the country’s existing fiat currency. Almost all proposals for CBDC implementation often involve the provision of universal bank accounts at the central banks for all citizens.
In highlighting the potential importance of Central Bank Digital Currencies (CBDC), the currency instead of relying on intermediaries such as banks and clearinghouses, money transfers, and payments could be made in real-time, directly from the payer to the payee.
CBDCs can also provide a secure and standard interoperable digital payment instrument issued and governed by a Central Bank and used as the national digital payment instruments to boost confidence in privately controlled money systems and increase trust in the entire national payment system while also boosting competition in payment systems. The provision of free bank accounts at the central bank offering complete safety of money deposits could strengthen competition between banks to attract bank deposits, for example by offering once again remunerated sight deposits.
As most country’s CBDC projects progress, the concern of reinstitutionalizing a centralized control of digital assets may be a turn-off to cryptocurrency enthusiasts who places a premium on autonomy. A general concern is that the introduction of a CBDC would cause the proliferation of payment services Fintech and thus make banks’ funding position weaker. However, the Bank of England found that if the introduction of CBDC follows a set of core principles the risk of a system-wide run from bank deposits to CBDC is addressed.
Although countries like China, Sweden, and others have entered the testing phase of their proposed CBDCs, the workability of a CBDC will only be known when the very first CBDC is launched. And according to the opinion of the Visa crypto chief, CBDC may become a global trend.