Everything You Need to Know About CBDC
There is no doubt cryptocurrencies have become a proper financial asset alongside cash. Ever since 2009, their popularity has risen drastically, having individual investors and even major corporations add cryptocurrencies to their individual or corporate investment portfolio. In November 2021, Bitcoin — the world’s major cryptocurrency — proved the doubting financial experts its true potential when its price surged to $69,000. From that moment on, crypto began to be perceived differently, attracting all public interest.
It was not only Bitcoin that paved the way for digital payments wide acceptance. COVID-19 was the reason prompting digital payment transformation — instead of going to stores and paying with cash, people used delivery services and paid through digital payment gateways.
Cryptocurrency mass adoption is a perspective that is too good to be true at the current state of events. However, there are first steps expected to be made — industries and governments are planning to introduce us to Central Bank Digital Currencies (CBDC). A CBDC is more of a bank alternative to stablecoins, which are considered cryptocurrencies backed by such fiat currencies like US dollar or Euro.
In today’s material we will discuss what are CBDCs, what are their key features and what to make of them in general.
What are Central Bank Digital Currencies?
Central Bank Digital Currencies are digital funds that are meant for a single ledger use (both distributed or not). CBDCs are no less than the central bank claim and function almost in the same way as fiat. Any CBDC will be controlled by a central bank, depending on the country of issuance. What makes it different from such stablecoin as USDT is that USDT is not controlled by a bank directly, however it is still pegged with the US dollar, which is a central bank currency.
The main problem about cryptocurrency that concerns financial institutions all over the globe is a higher risk of scams or cyber attacks. To combine transparency, traceability and other blockchain features but to reduce possible scam ventures, a CBDC project was created.
Unlike other cryptos, a Central Bank Digital Currency will be centralized. As financial institutions claim it, only centralisation can help prevent frauds from obtaining them just like banknotes have their unique serial number that makes any falsification difficult.
As of today, there are no countries which would fully implement CBDCs already. However, there are more than 100 countries exploring CBDCs to join the digital currency race.
Top 5 CBDC Key Features
1. It will enable public access to cryptocurrencies
While there is no guarantee that cash will become outdated as a form of payment, CBDCs will certainly make digital payments a competitive payment method. People will use CBDCs to pay for government services, bills of food delivery treating it like some sort of a digital banknote. It will be only a matter of time when they will want to explore other cryptocurrencies outside CBDCs.
It’s not only CBDCs that can make crypto popular — you can always do your share and start accepting crypto for your business or services. The Plisio platform can help: they have a ready-to-go crypto payment solution for any kind of needs. Integrating a crypto payment option will not only expand your client base, but contribute to the availability of public access to cryptocurrency.
2. CBDCs will advance the payment system
Just as CBDCs will expand public access, they will also improve the overall payment system. When fiat will transform into the digital platform operating on blockchain, this will provide for improved transaction speed, cybersecurity for users and also reduce the costs needed to produce paper money. There will be no low-denomination costs, just like Bank of Korea did in 2017 when they offered clients prepaid cards instead of change.
3. CBDCs Mean Less Paper Money
Cash use has significantly declined due to the introduction of credit cards, financial applications, and other digital tools. While a CBDC may not completely end the use of coins and bills, it will further promote electronic transactions. Both businesses and consumers can significantly benefit from this because digital exchanges provide increased convenience and security.
4. Cross-border remittances will become more secure
What makes international payments slow is the manual data processing carried out between banks. On top of that come high fees and time lags. CBDCs will eliminate all underlying issues and will provide for real-time transaction processing deployed on the blockchain network.
5. Finally, introduction of cutting-edge technology
Since the introduction of Bitcoin - the first ever cryptocurrency - plenty of new innovative cryptocurrencies have been introduced. A CBDC will follow the same scenario, with abundance of new technologies emerging from it. Mass digitisation is here, and the future is going to happen sooner than we expect.
Why Do Central Bank Digital Currencies Matter?
Even though any government regulation controlling money supply can’t be good for privacy, the CBDCs case is different. Central Bank Digital Currencies don’t mean strict monetary policy only — there will also come improved external and internal operations making the global payments more efficient. Individuals will find a way to benefit from simplified remittances all over the globe; even if CBDCs are associated with banks, the bank digital payment system will improve greatly and will bring it one step closer to mass adoption.
Central Banks Digital Currencies will bring digital remittances on the verge of revolution and there is no doubt about it. With digital payments coming closer to mass adoption, cryptocurrencies will rise again, improving monetary infrastructure on its way. One thing remains clear — individuals should keep their digital assets closer to themselves as there will be more control over it from countries' bank authorities.
If you don’t want to wait for CBDCs to make crypto a universal form of payment, do it yourself with the Plisio cryptocurrency payment gateway. With Plisio, you can easily accept cryptocurrency on your website for any purposes like business, services or donations. Explore plenty of useful tools, solutions and 18+ available cryptocurrencies for just 0.5% fee.
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