The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com.
As society starts to move away from cash, central banks’ potential to reap profits off issuing that cash could be threatened.
Many governments are worried about the mass adoption of cryptocurrencies and hence are considering the merits of creating a central bank digital currency (CBDC).
Central banks have woken up to the risks cryptocurrencies can pose to policy makers’ bread-and-butter business: the economy.
Hence the debate about the pros and cons of government digital currency closed private blockchains versus public blockchain cryptocurrency are increasingly on the agenda of policy makers and investors alike.
The mainstream media often wrongly refer to government backed digital currencies as cryptocurrencies without defining the new concept of central bank digital currency.
Cryptocurrency is a blockchain asset and not the liability of anyone. Central bank issued digital currency is based on a fractional reserve banking system based on debt and the liability of increasingly highly indebted nation state central banks.
Image Source: The BIS (Bank for International Settlements) report
Cryptocurrencies were created with the intention to make central banks, the traditional bastions of monetary policy, redundant in the face of a peer-to-peer electronic cash.
10 years after the publication of the Satoshi Nakamoto’s Bitcoin whitepaper[1], cryptocurrencies are considered to be utilized by the very institutions they were meant to subvert. Blockchain, the distributed ledger technology underpinning Bitcoin, is the tool that can be extended to a central bank digital currency.
Most of the current amount of money is digitized already, whether in bank reserves with the central bank, or in checking accounts at the local bank. Only a fraction of money supply is in paper money bills in circulation. But
