Central bank digital currency has its uses, but can it replace cryptocurrency?

Lots of countries' central banks are looking at cryptocurrency as the answer to their economic problems. Swedish Riksbank and the Bank of England have submitted and showed interest in participating in the crypto market.

After spending time tearing bitcoin apart, government and regulatory bodies continue to be surprised at how bitcoin has survived. Cryptocurrency has grown stronger with all the restrictions. Formed out of nothing and supported with large amount of computing power, this has proven that the theory that states that the value we place on things is determined by economic factors of demand and supply.

Though it is a digital currency and not fiat, it can form a global recognised payment system. Lots of control bodies have realised that controlling cryptocurrency will not be easy except by banning them outrightly or setting certain restrictions.

With this recent development, governing banks have started means of taking control of this space. According to https://britishbitcoinprofit.org/ , Oystein Olsen, the individual in charge of Norway Central Bank, on the issues of CBDCs states that governing banks provides the payment system with several characteristics that will become relevant to developing and retaining crypto in the future

This statement does not disregard the main objective of governing banks as regards crypto. It is that drive to remain in control and be at the centre of money flows that fuels the agenda of these restrictions. According to the governor, they need to gain extre knowledge before they now if issuing CBCD is appropriate or not.

Bitcoin has been the largest test in banking ever since the discovery of the internet. The plan to mine Bitcoin was recorded and published a long time ago. For it to have survived all the criticism during this time speaks a lot about its will power and strength to succeed. However, CBDCs are still at a very tender stage and with how things are going, it is yet to get a broader scope of usefulness and relevance.

The difference between CBDCs and Bitcoin is its decentralised form which makes it hard for anyone to issue at will. It is controlled by a free system which operates over hundreds thousand computers linked across different systems. No central bank or government has any control over when it is issued or when to take tax.

Unsurprisingly, Central Banks Digital Currencies will act as tokens like bitcoins just that they will be managed and issued by a governing bank. Now the point of this is that users now get to create an account with an agent of the bank or the central bank itself for them to receive or transfer between CBDCs.

The reason for this action is that normal tokens can be used as much as possible and can be copied but this is something that cannot happen with CBDC tokens. In the crypto market, the system of blockchain makes sure that cases such as double-spend or digital counterfeiting does not occur. As for CBDCs, they will now have the power to fight fraud from double-spend by debiting and crediting accounts.

Conclusion

With the governing bank's current structure, CBDCs stands as a classical innovation but it lacks merit. There are many question central banks need to focus on before they venture into such business. These questions include How they work? Will CBDCs be available to only institutions? Asides from simplifying clearing and settlement, what other crypto problem does it solve? These are important questions that need to be considered before this agenda is signed to law.