Can cryptocurrencies and CBDCs coexist in this era-defining economic landscape?
As much as we adore digital payments, including NEFTs, UPI transactions, and more, the concept is inherently hinged on the existing banking hierarchy. While in most cases, the bills are paid out instantly, the concerned banks working behind the scenes do need to exchange information back and forth to make the transaction successful. And a server issue or two only makes things worse, doesn’t it?
In comes CBDC (Central Bank Digital Currency) and speculations concerning its nationwide adoption! And leading Indian crypto evangelists like
CoinSwitch Kuber
are digging deeper into this new digital realm by dishing out several unexplored aspects for the readers.
Unlike our traditional payment schema, where banks store customer information in dedicated databases, and every two or multi-party transaction requires constant monitoring and insight exchange, CBDC aims to bring the entire payment structure under a single canopy.
But that’s way too much lingo! CBDC is primarily a digital token issued and even backed by the central bank, i.e., the RBI in India. When it surfaces, CBDC will also be regarded as a legal tender.
CBDC in the crypto space
Wait, isn’t CBDC anti-crypto? Well, not by a long shot. For those who are well aware of how fiat currencies and the existing digital payment arena work, CBDC will surely usher into a new and more efficient world of transactions. And guess what, CBDC will have blockchain technology as its backbone, thereby facilitating real-time fund settlements.
NEFTs beware.
But that’s not the only reason why CBDCs are being hailed! Central Bank Digital Currencies, all thanks to the inherent blockchain framework, will make it easier, quicker, and cheaper for the government to deploy complex monetary policies and assign stimulus packages without having to account for the hefty logistics.
No wonder CBDCs will rely on the permissioned side of blockchain technology. This means the blockchain will have a central authority to modify transactions if needed. Doesn’t sound like crypto, does it? Not exactly, but to profess monetary sovereignty and financial inclusivity even for the unbanked, it might just be the need of the hour.
What does this mean for cryptocurrencies?
If you have been waiting for this discussion to surface with bated breath, here is the true picture that lingers. Long story short, CBDCs will in no way negatively impact the popularity and stead of cryptocurrencies. Confused?
Well, don’t be! CBDCs, despite coming across as anti-crypto at the first glace, still use the same technological sets to impact the global transactional infrastructure. The concept of programmable money via smart contracts, basic levels of transactional immutability, quicker payments, and more will still be possible.
And it is also important to note that a majority of global CBDCs are contemplating the use of Ethereum blockchain to set up what will be the inception of a reimagined and efficient form of digital payment.
ET Spotlight SpecialCrypto-CBDC coexistence?
Short answer- Possible
Long Answer – With India being considered one of the global leaders in regard to crypto adoption, it is natural for digital respondents to be wary of government-backed CBDCs. But then, CBDCs will, in a way, add to the crypto craze by, first, getting the unversed right to the digital realm. And once people start exploring the diverse benefits of a blockchain-driven payment system, it wouldn’t take them long to venture out and look for something decentralized and private.
CBDCs, in their true form, will take centre stage when it comes to making payments simpler and quicker. Standard, decentralized crypto players with their on-chain cryptocurrencies will continue to function and thrive as a part of the crypto asset class.
To simplify further, CBDCs will speed up the transaction and regular payments while
Cryptocurrencies will continue to shine
, courtesy of the diverse use cases and palatial benefits in play. Sounds like a Win-Win!
What’s in it for crypto investors?
Truly, quite a lot. With Ethereum being considered at scale by major CBDC proponents as the go-to blockchain, crypto investors are slowly inching closer to the Ethereum-powered blockchains and their respective tokens. And a vast majority of them are flocking
CoinSwitch Kuber
and other credible Indian exchanges. Some of the key participants in this regard are the BAT (Basic Attention Token) and SNT (Status), two of the more popular cryptocurrencies that have soared quite a bit over the past few weeks.
The bigger picture: Inclusivity
CBDCs are filled with optimism. At least the ones that have blockchain technology powering adoption. But the bigger picture, in an era where financial inclusivity and asset class diversification are the key user requirements, hints at an amicable coexistence of cryptocurrencies and CBDCs. And the moment people start realizing the benefits of blockchain-driven financial rejigs, chain-relevant cryptocurrencies might see yet another bull run, with exchanges like
CoinSwitch Kuber
making wave riding easier for the Indian crypto adopters.
To be honest, the new era hinting at the development of a more inclusive digital payment infrastructure looks up to the snuff, especially with countries becoming more and more privy to cross-border transactions, quicker remittances, and a more compassionate space that doesn’t need to rely on the traditional banking systems. And that is why we are so upbeat about the CBDC-Crypto confluence running point on this.
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