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CBDC: How will central bank digital currencies change the financial system?
The idea of creating central bank digital currencies (CBDCs) is being actively discussed in the world. How will they affect traditional finance and the cryptocurrency market?
What is CBDC?
A CBDC is a digital version of a national currency created and controlled by a central bank. Unlike cryptocurrencies, CBDCs are centralized, which allows governments to fully control their issuance and circulation.
Advantages of CBDC
- Increase efficiency: Transactions through CBDCs are faster and cheaper than through traditional banking systems.
- Transparency: Controlled transactions can reduce the risk of fraud.
- Maintaining financial stability: CBDCs allow for better control of the money supply and fight inflation.
Risks for cryptocurrencies
- Competition: CBDCs can displace stablecoins (e.g., USDT or USDC), which currently dominate the digital payment segment.
- Control and censorship: Central banks can restrict certain transactions, which is contrary to the idea of decentralization.
Current status
More than 80 countries are working on developing CBDCs. China is ahead of the pack with the digital yuan, while the EU and the US are still testing their concepts. In Ukraine, the National Bank is also considering launching an e-hryvnia.
Conclusion.
CBDCs have the potential to change the financial system by combining the advantages of cryptocurrencies and government control. However, their implementation poses new challenges for traditional cryptocurrencies and investors.
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