Millions of people are familiar with cryptocurrencies and invest in these digital assets. It is estimated that cryptocurrencies have more than 300 million users worldwide. This kind of mass adoption caught the attention of central banks, which plan to launch Central Bank Digital Currencies (CBDCs). Here’s what you need to know.
What is a CBDC?
Central Bank Digital Currency (CBDC) is a digital version of a fiat currency, whether it is a US Dollar or euro. Many countries are working to develop CBDCs as they would be much more beneficial for central banks. CBDCs could lower the payment costs for all parties while offering faster, easier and more secure transfers.
Is Britcoin on the way?
After Liz Truss was in office just for 44 days, Rishi Sunak succeeded her as a new Prime Minister of the UK. He is fond of the idea of CBDCs and wants to introduce Britcoin, a digital version of the British pound to Britons. So cash could be gone soon with a new Prime Minister, who is a public supporter of CBDCs for years.
This could be the most significant change in the monetary financial system in centuries. The Bank of England (BoE) may substitute cash with equivalent digital money, which could allegedly benefit the economy in times of economic crisis. CBDCs could reduce the cost of payments as well as be much faster to move.
Critics warn that the introduction of a digital pound could increase financial instability. They claim that it might be more difficult for the Bank of England to control the economy through monetary policies like setting interest rates. Additionally, there are worries that the launch of Britcoin could result in increased loan or mortgage rates.
Sunak was tasked to examine the possibilities of Britcoin, and with him as a Prime Minister, it seems that the British CBDC is only a question of time. However, it will be a tough fight as central banks will have to compete with cryptocurrencies like Bitcoin, Ethereum or stablecoins.
Central Bank of Turkey to launch CBDC in 2023
The UK is one of many countries thinking about CBDCs, as Turkey plans to launch its own digital currency in 2023. Turkey announced interest in CBDC in 2021 and launched its project called “Central Bank Digital Turkish Lira Research and Development,” which looks into the possibilities of CBDCs.
A “blockchain-based central bank digital currency will be put into practice,” the program’s Balance of Payments section’s subheading under the heading Policies and Measures stated. The accountable organization is Turkey’s central bank, with assistance from the regional scientific and technological research institute and the ministry of finance.
The Digital Turkish Lira will reportedly be integrated with digital identity and FAST, a payment system by the Turkish central bank. The report also stated the central bank plans to collaborate and test CBDCs with other banks.
Kazakhstan integrates CBDC on BNB Chain
The influence of CZ, the CEO of Binance, on the crypto world is undeniable. He is working with several countries to integrate cryptocurrencies, digital identities, or CBDCs into our society. His latest visit to Kazakhstan was reportedly a huge success, as the country will implement its CBDC on BNB Chain.
— CZ 🔶 Binance (@cz_binance) October 27, 2022
The National Bank of Kazakhstan said it would test and digitalize its fiat currency last year with a deadline of deciding by the end of 2022. CZ stated in his tweet that Kazakhstani tenge’s digital version would be integrated into BNB Chain, but no dates were mentioned yet.
The development of cryptocurrencies made central banks pay attention. Now they want to launch their own CBDCs one by one. These digital currencies are an inevitable step for our modern financial system that is going digital. Now cryptocurrencies and central banks’ digital currencies will compete with each other even though they all have their own pros and cons.