When Bitcoin first came out, central banks ignored the potential of Blockchain and even tried to prevent the adoption of cryptocurrencies. When it was understood that cryptocurrencies are not just hype, we started to talk that we can see central bank digital currencies (CBDCs).
Central banks are now in a hurry to adopt Blockchain to ensure cash control. Although central bankers still despise Bitcoin, they can at least create digital currency versions that they can track.
Central Bank Digital Currency (CBDC)
Deutsche Bank analyst Marion Laboure told Reuters that central banks will likely issue the first “general purpose digital currency” within three years. The analyst also says that the COVID-19 pandemic speeds up the process considerably.
In January of this year, the European Central Bank created a think tank to create CBDCs with central banks in Canada, the UK, Japan, Switzerland and Sweden. The International Reconciliation Bank (BIS) also joined the initiative. The group represents about 1.5 billion of the world’s population.
Laboure said the group of central bankers should meet this month to discuss digital currencies. However, the status of the meeting is currently uncertain. However, central banks have to distribute a large amount of cash to companies and households during the worst economic crisis of recent times. Blockchain powered digital currencies can help them streamline many processes.
Individual Cash Can Be Injected
According to Laboure, CBDCs will help central banks develop quantitative relaxation programs because they can directly inject cash into companies and households.
Although there is already digital money in banks and credit cards, CBDC will differ in terms of authorized Blockchain placements. Individuals and companies are likely to have digital wallets in the future.