The Main Factors to Consider in the Growing CBDC Debate

A central bank digital currency (CDBC) is like a digital version of a national currency. With governments across the world discussing the likes of a digital pound, a digital dollar, and a digital euro, this is a good moment to think about the main factors to take into account.  

Privacy and Security 

One of the major concerns expressed over digital currencies is the way that they could remove a great deal of privacy from our financial lives. That’s because it would potentially be easier for governments to track our transactions, removing the pseudo-anonymous nature of cryptocurrencies that many users find attractive. It could make it easier to handle areas like tax returns but now every user is likely to welcome this approach. 

On the other hand, digital currencies are regarded as being extremely secure. It’s nearly impossible to hack a blockchain and most of the unwelcome incidents experienced in this industry have been due to other factors such as fraudulent websites and tokens that were over-valued or poorly designed in the first place. Major currencies that switch to a digital format will be backed up by robust security measures so this shouldn’t be a problem.

Financial Inclusion and Speed

The question of financial inclusion is crucial to the CBDC debate. This is especially true in low-income countries where a large percentage of the population may be unable to open a bank account or obtain formal credit facilities. The International Monetary Fund points out that financial inclusion is one of the key objectives of the world’s central banks, with the risk-free and low-cost nature of these tokens among the benefits.

Financial inclusion is one of the key reasons that the Bahamas introduced the Sand Dollar as one of the world’s first digital versions of a national currency. It’s also hoped the CBDCs will make payments speedier, with online and offline payments available instantly.

How Could It Affect Us In Other Ways

In terms of everyday traders, they should be able to continue trading underlying assets such as pound to euro CFDs. This type of trading allows the trader to trade on the price movements of underlying assets. This type of investment will still be possible with digital currencies.     

A further issue to take into account is how central banks will adapt their monetary policies to take into account CBDCs and the physical version of their currency. If they get it wrong then it increases the risk of inflation getting out of control and possibly fuel speculation that could harm the country’s economy.

Expect to see the debate over CBDCs intensify in the next few years, as more details are released of how these digital currencies are going to work. While many people are looking forward to handling all their cash in this way, there are sure to be others who are wary of the change and how it could affect them. 

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