Connect with us

Fx Analysis

Ukraine to Allow CBDCs while BoA Anticipates Demise of Cash – CBDCs Weekly

Published

on

As development of a U.S. based Central Bank Digital Currency (CBDC) continues, an increasing amount of figureheads are speaking on their future importance.  Whether this is the result of a need to keep up with the joneses (i.e. Ukraine) or the Bank of America touting the effectiveness of CBDCs, the end result will be the same – a future inundated with digital currencies from private issuers and central banks alike.

The United States ‘Needs’ a CBDC

In a recent discussion with the Aspen Institute Economic Strategy Group, Federal Reserve Governor Lael Brainard shared her thoughts on a potential U.S. Central Bank Digital Currency.

Interestingly, Brainard specifically notes that a key reason behind the United States ‘need’ for a CBDC, is due to the actions of nations globally.

“The dollar is very dominant in international payments, and if you have the other major jurisdictions in the world with a digital currency, a CBDC(central bank digital currency) offering, and the U.S. doesn’t have one, I just, I can’t wrap my head around that…That just doesn’t sound like a sustainable future to me.”

Beyond the need described above, Brainard noted the following points as driving factors behind the creation of a CBDC.

  • Increasing efficiency of opaque, long, and costly intermediation chains
  • Staving off rise of stablecoins and a potentially ‘fragmented payment system’
  • Easier distribution of funds among citizens

While it isn’t a given, a U.S. based CBDC is widely expected to be unveiled in the coming years.  Whatever the scenario, the government will be ready, as it is already actively developing this product in an effort to hit-the-ground-running when the green light is given.  For the time being, various members of Congress are still on the fence pertaining to their need, and believe such a product should be handled by the private sector.

Ukraine to Allow CBDC

While the U.S. may still be mulling over the need for a CBDC, other nations are rolling full steam towards their eventuality.  One of the most recent examples of this comes from the Ukraine, where President Volodymyr Zelensky signed a bill allowing for the National Bank of Ukraine (NBU) to develop and issue its own CBDC.  This development is the result of years-worth of research in to the CBDCs, dating back to 2018, when the NBU first began mulling over the idea.

In addition to now having the ability to launch a CBDC, the bill allows for the creation of a FinTech sandbox, and provides increased clarity/definitions surrounding nine categories of payment service providers.

Bank of America Anticipates the Demise of Cash

If the development of CBDCs by other world governments wasn’t enough to spur the United States in to action, perhaps recent reports from the Bank of America (BoA) will be.

Not only does the BoA find that CBDCs are ‘a much more effective payment system than cash’, it believes that these digital assets have the potential to ‘replace cash completely’.

Part of this reasoning is its belief that rising public use of blockchain-based digital currencies is resulting in a decreased demand for existing currencies.  As a result, central banks will be forced to release CBDCs to compete – eliminating cash along the way.

If this scenario does come true, cash may not be the only victim of CBDCs.  There are those worried about the future of other assets like Bitcoin.  The Motley Fool recently took a look at how a CBDC would affect digital currencies, and whether or not investors should be worried.

“…a CBDC network’s revolutionary potential, coupled with the legitimacy of government backing, has the potential to entice many people to flock to its coin, putting it in direct competition with decentralized cryptocurrencies. Since the latter require growing user adoption for sustained price appreciation, many cryptocurrencies could end up struggling in the face of this formidable competition.”

The Blogger Scientist is a "Medical Physiologist" and a "Financial Asset" Content Creator who aims at enlightening web reader on varying Financial Assets such as Stocks, FX, Crypto, MLM,. HYIP among others.

Advertisement
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *