85% of Central Banks Are Designing a CBDC. The Risks, as Well as the Reasons Why Bitcoin Reigns Supreme

On April 4th, 2022, the international accounting company PwC published the second annual Global CBDC Index results. In this paper, PwC analyzes how far central banks have come to implement their digital money forms and presents their findings. More than eighty percent of central banks are interested in starting a CBDC, or have already done so. This statistic should not come as a surprise to you.

CBDC is an abbreviation for "Central Bank Digital Currency," which I'll explain for those of you who don't follow the news. A CBDC, or central bank-issued digital currency, is a kind of digital money that operates on a Blockchain, the underlying technology that underpins Bitcoin (but lacks the cryptocurrency's decentralized nature). The following is the perspective that the Bank for International Settlements has towards these digital currencies:

"CBDCs are what money will look like in the 21st century."

China was the first big country to have its central bank undertake a pilot project for its own digital currency, and it did so in 2016. Since Xi Jinping's speech in October 2019, it has been officially recognized as part of China's national property. The digital version of the yuan is already very advanced, and China is working toward the goal of gaining the first-mover advantage in this field. The objective is quite clear: to pose a threat to the preeminent position held by the US dollar in international finance.

80% of Central Banks Are Preparing a CBDC

The European Union will not be outdone, since the European Central Bank (ECB) has been considering the possibility of a digital euro for the last several months. It is anticipated that the European Commission will submit legislation the following year in order to assist its growth. Additionally, there has been an increase in conversation in the United States on the possibility of developing a digital dollar.

According to PwC, there is little question that CBDCs are a step in the right direction: "CBDCs will permit more efficient, cheaper, and 24/7 cross-border payments for the financial services sector." We anticipate that CBDCs will be of significant value to international trade and the economy of all engaged countries.

Both retail CBDCs, which are those that are issued for use by the general people, and wholesale CBDCs, which are those that financial institutions utilize with cooperation from the central bank, are ranked out of a total of one hundred in the PwC study. According to the survey, CBDCs who sell to consumers directly have greater experience than CBDCs that sell to businesses.

The digital currency known as the "eNaira" of Nigeria was given a score of 95, making it the most developed of the two categories taken together. The Bahamas were the first nation in the world to establish a CBDC for retail sales, and it was called the Sand Dollar. This will be the year when Jamaica's CBDC, the Jam-Dex (now rated 4th), goes live. Because of their collaboration on the mBridge initiative, which seeks to make international financial transactions easier, Thailand and Hong Kong are at the top of the list for the wholesale CBDC category.

Countries like Canada, Singapore, France, and South Africa have also completed significant projects in this area.

Last but not least, the PwC paper offers a general introduction to stablecoins. In a recent post, I discussed the imminent major flipping that would take place at the end of 2021 between Tether USDT and USDC. According to the specialists contributing to this analysis, privately issued tokens will continue to develop alongside CBDCs while coexisting with them. It is "impossible" for a fund or institution "to be active in crypto without employing stablecoins," according to the research, which also notes that stablecoins have developed into a "integral element of the cryptocurrency ecosystem."

The danger is looming for the future, and your best weapon is Bitcoin

This research is intriguing, but it acts as if it has forgotten the fundamental challenges that CBDCs provide to the general public. These problems may be broken down into three categories: ownership, personal privacy, and personal liberty.

The fact that an increasing number of central banks are going through with the creation of their own CBDCs is, make no mistake about it, an indication that the threat is becoming more apparent to the general public. The shortcomings of fiat currencies have been extended into the digital realm via the use of these CBDCs. Nothing more, nothing less. By keeping track of everyone's financial dealings via these CBDCs, the powerful individuals who run the system we have now will have an even greater ability to exert their authority over the populace.

When this occurs, there will be a strong desire to classify people into different categories and provide them access to different privileges based on whether or not they comply with the arbitrary norms that the government determines. Censorship and confiscation will be significantly more effective due to this increase in capabilities.

There is also discussion of a potential expiry date for the digital currency used in China, which might be done to encourage individuals to spend their money and increase domestic demand if required.

You do not want to do anything like this. If any of this is going to be feasible, it will be largely because CBDCs will be centralized and controlled by a very small number of individuals. The issue of centralization emerges when using stablecoins, as does the question of whether or not the reserve assets can be transparently seen. Stablecoins are a less problematic solution than CBDCs; yet, they do not cure the underlying issue.

Bitcoin is the solution to the underlying issue, which was entirely omitted from the PwC study.

Because Bitcoin is indeed the technology that enables you to maintain control due to the decentralized nature of its system and the lack of a leader. Although others still do not believe it, over the next several years, an increasing number of individuals will come to terms with this fact. Even while monetary transactions will still be possible in the not-too-distant future, the issue of whether or not they will be necessary will emerge in a world where everything will eventually be converted to digital form and where governments will exert significant pressure in this direction.

Because of this, Bitcoin will become a solution that is utilized more and more, which is why the prospect of Bitcoin having one billion users by the year 2030 does not strike me as very utopian at all. As is always the case, only the future can validate or invalidate my vision. Watch this space!

That's all for today, see ya tomorrow! If you want more, be sure to follow our Twitter (@croxroadnews)

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.