A state backed digital pound is likely to be launched according to the Treasury and the Bank of England. With the declined use of cash and advances in technology, many countries and banks have had the idea of making a central bank digital currency or CBDC. It would be a trustful and safe way for people to be able to pay completely digital through their phones, or other devices.
The CBDCs would use blockchain technology like a cryptocurrency does, but it would be centralized and the value of each pound would not be change. For example, 10 dollars cash would be 10 dollars in the central bank digital currency. The CBDCs would be accessible through a digital wallet or smartcard. Another part of the groundwork for a CBDC is that it would be backed against an asset. Prime Minister Rishi Sunak asked the Bank of England to look into backing a currency, in 2021, as chancellor.
Changing a national currency from paper to digital would have drastic macroeconomic effects. If a CBDC is backed by a fixed asset, then our banks will be restricted and not allowed to print as much money as most economies have in the last 3 years. A CBDC would slow growth and inflation down though because of the inability to increase the money supply. Many digital payment processing companies like Venmo and Zelle would see an increase in activity due to money becoming more digital too.
There is controversy with CBDC's. Many people are critical of blockchain technology because of the recent collapse of FTX and crypto currencies like Terra Luna. Many fear that this technology also will ruin privacy as "There are likely to be initial restrictions on how much of the currency any individual or business could hold"(BBC) and people speculate that what you spend your CBDC money on is able to be tracked by others.
Overall, I think that the idea of a CBDC is not the best idea because I fear that the government will be able to manipulate how and what I consume when the CBDCs roll out. I may be against the idea, but I do see the initial framework and infrastructure of CBDCs being implemented soon as many financial leaders and banks have been open about their interest in blockchain technology. These coins being rolled out will require crypto regulation, and now is the perfect time to regulate crypto given the hostility against it by the masses.
Link: https://www.bbc.com/news/technology-64536593
1 comment:
I would agree that accepting cryptocurrency as a form of acceptable currency would not be a good idea at this point in time. I do expect that cryptocurrency will become the norm in time, but the security risk at this point for all involved is too high at this time. In terms of cryptocurrency being accepted as a legitimate form of currency, it will survive and is much more durable than other forms, and the appeal of slowing down inflation is especially exciting now, but it could very quickly become a privacy concern.
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