It seems that the pursuit of central bank digital currencies (CBDC) has gained so much momentum lately. China, came up with the digital Yuan raising speculations about the possible agenda. Then US and the European union announced their Digital dollar and Euro to be utilized soon. On the surface, this was a development toward the up and coming financial technology.
The Threat That is Crypto
With the rise of the cryptocurrency industry, central banks lost a great deal of dominance over the world’s finance. This was due to the superior profits, anonymity, availability and better exchange rates that crypto provides. On the other hand, a crucial medium for these transactions were the stablecoins. A type of digital currency that has its value pegged to another asset such as fiat currencies.
This emerging market with high inflows is causing great concerns for governments regardless of their political orientations. In a recent opinion article, we discussed how the cryptocurrencies were having an impact on the China’s political structure. On the other hand, the massive inflow into crypto currencies has cost gold a great deal of inflows. In that regard, US banks are deeply concerned with this prevailing phenomenon. Only a few days ago, we predicted that due to the recent increase in SCE’s activities, there could be a wave of destructive crackdowns coming toward crypto-related institutions.
Commence the Trojan Horse
With all that said, the persistence to create a national CBDC seems to be bit rushed and a bit unnecessary. After all, why not adopt a pre-existing stablecoin? Why must central banks spend billions of dollars to re-invent the wheel?
A CBDC provides so much regulatory potential for a government. To begin with, it could be much easier to trace the transactions utilizing CBDC. However, it’s entirely possible that at some point, governments demand that entry and exit into the crypto market can only be done using CBDC. In that case, it will be much easier to impose taxes on investors as their private activities are compromised.
CBDC and the Negative Interest Rates
In an eye-opening Wall Street Journal article, the famous financial journalist James Mackintosh has pointed out a possible use case scenario for CBDC. According to Mackintosh, CBDCs can be an over powered apparatus for central bankers to adjust interest rates. As of now, the interest rates are the lowest in the US at 0.25%. In the worst case scenario, they could only fall to zero. When it comes down to that, people would rather keep cash under their pillows than to have it held in banks.
So long as there is cash, you are the master of your own money. Yet, when speaking of CBDC, banks will have the capability to impose “deeply negative interest rates”. You heard me right, with digital money, central banks can impose negative interest rates or better said “harm rates”.
This strategy is a last effort to fight inflation in a country but nonetheless, people must be in charge of their money. If central banks are responsible for the inflation to begin with, should they harm our life savings in the times of need?
The Current State of CBDC Projects
The Atlantic council has a dedicated CBDC tracker on their website. As of now, 5 countries have launched their central bank digital currency projects. The China is currently piloting the project while the US is in the research phase.
As the crypto market grows in value, the oppressive regulations and false interventions rise in numbers. Unchallenged for many years, Central banks are now desperate to defeat their foe. Lobbyist politicians are creating FUDs and spreading fear in order to fight crypto. And finally, CBDCs are being developed fast. In many ways, we are witnessing a financial renaissance. The traditional neoclassical finance is faced with the peril of a pragmatic opponent. The question is, in the escalating tensions between both parties, will the common folk prevail?
Our Vision
We believe in crypto, not only for income but liberation as well. Although we’re not the first decentralized online exchange, we’re looking to be the best. We believe that the market should be accessible and the customer has the right to maintain as much anonymity as they desire. This goal is now possible thanks to our automated systems and 24/7 customer support to ensure a secure and reliable exchange process. You can exchange your cryptocurrencies and digital currencies on hi.exchange. Also, we have technical price analysis for Bitcoin and Altcoins, opinion articles and news on our blog to keep our customers up do date with the latest news and professional analysis for their investment journey.
