The Coronavirus pandemic has demonstrated the need to get relief efforts fast tracked. Even though nations are rolling out huge financial stimuluses all over the world, what is being to ensure execution at the ground level?
In other words, when millions of people in America are filing unemployment benefits, are they getting the check in their mails instantly?
Alternatively, when daily wage earners are walking back home in the country of India, has the government initiated a way, where they can get food, ration and monthly money in an easy, non-complicated fashion?
Unfortunately, the short answer to the problem of both these gigantic economies is negative! Traditional finance systems have many handicaps when it comes to quick disbursements. Often bureaucratic processes, paperwork and corruption defeats the purpose for such exercises.
However, the question is often raised- can there be a way by which we can eliminate all the hurdles and provide relief instantaneously?
Central Bank Digital Currencies (CBDCs): Meaning and Introduction
Accelerated by the Coronavirus pandemic, the world has started initiating the dialogue around CBDCs. As the name suggests, CBDCs are part crypto part digital currencies, issues by the Central Bank of a nation and has the same effect as a national fiat currency.
The reason why CBDCs are being pushed or talked about is the instant and easy nature by which they can facilitate and streamline complex financial systems. They can also help the government track, monitor and survey every transaction, which has been made using them. CBDCs are trackable, are based on cryptocurrencies and work seamlessly with traditional fiat currencies.
According to official statistics, nearly 80% of all nations in the world are in some form of research and development when it comes to CBDCs. Privacy advocates raise the concern of increasing surveillance from CBDCs. However, the benefits in the case, far outweighs government over reach.
Many commentators state that within the next decade, we will see national economies move to their new CBDCs.
Where do some Nations stand on CBDCs?
If you have been watching the news, a new development has shocked the world in recent times. No, I am not talking about the Coronavirus, but something that also originated in China. We are talking about the new Chinese national crypto- the Digital Yuan.
The People’s Bank of China along with other national authorities in China has already rolled out the Digital Yuan. The CBDC was in the works for a very long time, a fact that was referenced by Xi Jinping in October 2019.
Mauritius, a small island nation in the Indian Ocean is also looking at a nationalised digital currency to boost its economy. Travel and tourism continues to be the mainstay of the small nation. However, its young central bank governor, Harvesh Seegolam spoke as to how Mauritius is in the process of evolving its own digital currency backed by the government.
Bigger economies like USA and UK are not so enthusiastic about CBDCs. UK’s representative at a global conference spoke of how the bank or the government is not open to the suggestions of anybody with regards to the country’s CBDC. In the USA, though the demand for the Digital Dollar is picking up speed, many are not too hopeful about the same.
It should be pointed out that most of these CBDCs have heavily borrowed their frameworks and transaction technology from Bitcoins and Blockchain. The only major difference in the working is that the CBDCs are not decentralized in nature.
With Bitcoin becoming a mainstream financial asset to successfully hedge against inflation, nations are opening up to the possibility of exploring the technology for their own evolution of the fiat currency. The Bitcoin treasure continues to attract more and more people to invest in Bitcoins.