Digital currencies that are issued by central banks are known as central bank digital currencies (CBDC). Although the development of CBDCs is still in its infancy, some nations are considering the idea of launching their own CBDC, while about 15 Countries already have theirs running, like Canada, Japan, Thailand, Brazil, Nigeria and others.
The adoption of cryptocurrencies could be threatened in a number of ways by CBDCs.
First, compared to cryptocurrencies, CBDCs might be more generally accepted by businesses and retailers. This is because CBDCs would have the support of governments and central banks, which would increase their legitimacy. CBDCs may bring about more competition in the market for digital payments.
Second, compared to cryptocurrencies, CBDCs might be subject to stricter regulation. This might make them more appealing to consumers, but it might also turn away people who value their privacy and freedom from governmental interference and control.
Third, since CBDCs are centralized, central banks have influence over them. CBDCs might increase the power that central banks have over the financial sector. However, this can be interpreted as posing a risk to people’s freedom and financial privacy and they might become less appealing to users who prefer decentralized and trustworthy systems.
CBDC Could Help Crypto Adoption
Of course, it is also conceivable that CBDCs might assist the acceptance of cryptocurrencies. CBDCs could assist in spreading awareness of digital currencies among the general public and creating the infrastructure required for their widespread acceptance.
If CBDCs would hinder the adoption of cryptocurrencies, it is yet too early to say for sure. But it is undeniable that CBDCs might have a big effect on the cryptocurrency industry in general.
Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any service.
Image Source: simpson33/123RF // Image Effects by Colorcinch
