London: With the increasing popularity of Bitcoin cryptocurrency and online payments during the pandemic, central banks are looking for new units of their own. This is the appearance of central bank digital currency, which is different from encrypted currencies and stable coins. Facebook supports projects like Diem.
What is the central bank doing? With the support of Europe’s largest economy, Germany, the European Central Bank is considering introducing a digital euro that can be guaranteed by the central bank, which in turn can provide greater security.
The bank account must be linked to the digital euro. In view of Europe’s privacy concerns, it is expected that a formal decision on the way forward will be made after consultations this year.
A technology similar to a blockchain ledger can be used to complete the transfer of the digital euro. In this technology, the European Central Bank emphasizes that the digital euro will not replace cash and should not be regarded as a cryptocurrency.
Thirteen years after Bitcoin was founded, although the broader cryptocurrency market has grown to more than US$2.0 trillion, its use as a means of payment has not yet been widely used.Although the value of Bitcoin today is approximately $60,000, the European Central Bank has announced that the euro will remain the euro.
Since 2014, the Central Bank of China has been studying digital currencies and is testing the use of “digital yuan” or “electronic renminbi” in various pilot projects across the country.
Consumers across the country are already using mobile and online payments extensively, but the digital renminbi allows the central bank to have more data and control payments instead of large technology giants. The start date has been announced.
China intends to allow foreign athletes and guests to use its digital currency during the Beijing Winter Olympics next year.
The Bank of England is working with the British government to study whether it is possible to create a digital currency that can be used by households and businesses to replace cash. Finance Minister Rishi Sunak named this initiative “Britcoin”.
In the United States, the Federal Reserve is investigating a possible online dollar, but the issuance of cryptocurrencies like Bitcoin is determined by an algorithm rather than the monetary policy committee of the central bank.
The decentralized system ensures that Bitcoin creators cannot print. For example, new funds will stimulate economic growth.
At the same time, the central bank attacked the highly speculative cryptocurrency world.As for the UK project, “With the speculative boom among cryptocurrency investors, the (UK) government will be prepared to distance itself from people who are still considered to be paying for the Wild West of the world,” Hargreaves’ senior analyst Susanna St. Le said. Stockbroker.
Lansdowne added: “The appeal of decentralized systems may make cryptocurrencies the focus of speculators. What about stablecoins? Since the threat posed by the proposed Diem block and other stablecoins will be backed by Facebook rather than Bitcoin, the European Central Bank appears to be considering another digital euro.
Stable coins are considered to be less volatile than cryptocurrencies because they are tied to traditional units. Euros and US dollars. If Facebook allows Diem to process payments on its social media platforms, including WhatsApp, traditional currencies may suffer losses.