The US Dollar could go digital. Here are the facts

As technology continues its revolution in how people do business, live and spend money, central banks across the globe are taking steps to bring their local currencies for the new digital world. Today the United States is one of the first nations to signal "urgency" by seeking a digital currency from its Central Bank. The Central Bank Digital Currency (or CBDC) will permit the US to seek an electronic equivalent to the dollar.

According to the facts sheet from the White House, part of the President's executive directive on digital assets on Wednesday is "placing the highest priority on research and the development of a possible United States CBDC. If issuance is deemed in national interest,"
China, which is the second largest economy in terms of gross domestic products, soft-launched their digital currency renminbi in the month of January. The CBDC has more than 100 million users. Kristalina Georgieva (International Monetary Fund's managing director) stated that CBDCs had been considered in some way by more than 100 countries in her speech to the Atlantic Council think tank last week.
Georgieva declared, "We have gone beyond the conceptualization of CBDCs. We are now in stage of testing." "Central banks are getting used to with digital currency and are trying out different ways of using it."
CNN Business spoke with David Yermack from New York University's Stern School of Business as the chair of the department of finance. He claimed that it was now "inevitable" that the whole world would soon be able to issue money in this manner. In the United States, the pandemic has prompted demand for cashless payment methods. A lot of Main Street investors have embraced the cryptocurrencies bitcoin and ethereum, placing pressure on the federal government not to fall behind on the new trend.
The Biden administration now putting new emphasis on the development of Americans with money and cryptocurrencies, here's what you need to know about CBDC.
What is a Central Bank Digital Coin and how does it function in practice?
CBDCs are a digital version of the central bank's money that is easily available to anyone, according to the Federal Reserve. One of the main differences from traditional forms of digital cash in a bank account or payment app is that the money would be a liability to the Fed and not commercial banks -- thus the designation "central bank currency." It would therefore be an actual US dollar in digital form, and not an investment in a cryptocurrency, or an account within your PayPal.
There are many differing opinions about how this might be done and how it would look at it, theoretically it can decrease the necessity of using third-party processors for money transfers.
"At https://cryptoblogstar.com/crypto-friendly-countries-are-working-to-understand-cryptocurrency-laws/ , CBDC is essentially CBDC is simply digital money that is issued by the central bank" Sarah Hammer, the director of the Stevens Center for Innovation in Finance at the Wharton School of the University of Pennsylvania she told CNN Business. "It will use the fiat currency of that country and base it on the money supply. Then, it will be implemented with a database that is approved by the government or private sector organizations that have been authorized by the government.
Yermack is an academic researcher who has been closely following the rise of digital currencies over the last years. He said that a CBDC "would actually function quite a bit similar to Bitcoin or other cryptocurrencies."
"You'd have the system of wallets likely owned by members of the public, through which people could pay each others directly, without the need to make use of a third-party service," Yermack stated.
Hammer believes that the biggest technology decision for policymakers is whether or not a US central bank's digital currency runs on Blockchain technology, the technology that is the basis of Bitcoin. This would place the government's weight behind the technological advancements.
Hammer said that it can be controlled by a central database or by distributed ledger technology, like the Blockchain.
The Federal Reserve Bank of Boston as well as the Massachusetts Institute of Technology published joint research last month on an CBDC project known as "Project Hamilton." The work used blockchain technology and "produced an application code capable of handling 1.7 million transactions per second," per a statement from the Boston Fed. This was far higher than the 100,000 transactions per minute the Boston Fed initially was the goal. The statement also stated that Project Hamilton "focuses on the field of technological experimentation and does not aim to build a functional CBDC for the United States."
Yermack declared that it was "likely" that the Fed will take what they're doing and then try to expand.
However China's digital currency, the yuan (or digital money) doesn't use blockchain technology. The Internet—From ARPANET To Decentralized Network aims to replace cash and is accessed by a government-backed mobile application , as well as Tencent's WeChat. The People's Bank of China issued it. It is based on existing tech infrastructure , which is utilized by Chinese online and commercial banks as well as payment platforms.
What are the possible advantages and dangers?
A CBDC could provide customers with the ability to save money, make transactions simpler, and safer alternative to other alternatives. Hammer says that CBDC can help in reducing the problem of cash shortages and also reduce fraud. It can also make it simpler to collect taxes or distribute government funds.
"There are certain financial integration benefits to having central bank digital currency," she stated, pointing out their ability reach Americans who don’t own bank accounts.
Yermack noted that there are numerous possible risks, including privacy and security threats as well as technological barriers and security issues. Many have expressed their concerns about the possibility of it being able to take on tasks previously completed by commercial credit markets or banks.
In the January report in January, the Fed highlighted cybersecurity risks and advised that any CBDC infrastructure should be extremely robust to these threats. The CBDC infrastructure operators should also remain vigilant to bad actors using ever more sophisticated tactics.
A CBDC could also affect the independence of the body and trigger numerous new questions about policy.
Yermack stated that there is a high risk of political abuse. "If you gave the central bank this power the security measures to the Federal Reserve would likely need to be more robust than they currently are."
Yermack said that the creation of a CBDC will likely require "thoughtful changes to the way politics are conducted" and a transitional period during which nations try it out over the course of a decade. However, he still believes there are "many compelling arguments" to do so.
Yermack stated that cash isn't something people like to use. The desires of the people push the government to this end, too.

They posted on the same topic

Trackback URL : https://adatzoz235.bravejournal.net/trackback/10826785

This post's comments feed