CBDCs are a Real Competitor for Cryptocurrency
CBDC Compete Crypto – In December 2021, the governments of France and Switzerland and their associated government-run central banks, along with commercial partner banks, completed Project Jura, a digital currency trial to settle transfers of significant funds between the country.
A CBDC, or a central bank digital currency, is just a form of a country’s money in a digital-only format. The most significant difference between this and crypto is that the CBDCs value, backed by the government that issues it, is the traditional backing of 21st-century currencies. Specifically, this was a trial for the large transactions that banks do between each other; this was not a test run for retail use, although that is in the works.
“The trial involved the Bank for International Settlements (BIS), Swiss banks UBS (UBSG.S) and Credit Suisse (CSGN.S) and France’s Natixis, alongside Swiss bourse operator SIX, fintech R3, and consultancy Accenture (ACN.N).” (Reuters.com)
“During the three-day trial in November, 200,000 euros of commercial paper was issued against a wholesale CBDC and transferred between the banks, along with foreign exchange transactions ” (Retuters.com)
CBDC Compete Crypto
Comparing Cryptocurrencies to CBDCs, there are a few significant differences. The previously mentioned government backing of CBDCs is a considerable difference. Additionally, the oversight and regulation are vastly different. The global banking system is subject to stringent rules and auditing practices to ensure no materially misstated information that could harm bank users and investors. Lastly, although Cryptocurrency is advertised as decentralized, there are severe market manipulators. Big crypto exchanges, banks, and even countries are known for manipulating the market with large purchases and sales to benefit themselves. While this is also possible with CBDC, a more regulated space allows for a lower chance of market manipulation.
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