Bitcoin is booming
We are going to look at cryptocurrencies and or bitcoin in terms of currency to transact ~ Uber CEO
We sold 17 cars, Bentleys and Rolls for bitcoin ~ Tilman Fertitta (American billionaire businessman)
Tesla buys $1.5 billion in bitcoin, plans to accept it as payment ~ Elon musk
There's been a lot of news about digital currencies lately. Companies like tesla, square and PayPal have been getting into cryptocurrencies in a big way, with big billion dollar bets on bitcoin specifically. It’s adding mainstream credibility to cryptocurrency. All of this is forcing the countries to get more serious about their digital currency. Whether this turns bitcoin in a viable currency is that of a speculative investment or a store of value, remains to be seen.
Governments
Growing number of governments around the world that aren’t going to wait around. Sweden is testing an e-krona China, Europe, USA, and emerging economies have introduced pilot programs. In 2020 about 60% of the world 65 central banks surveyed that they’re experimenting with digital currencies. That’s up 18% compared to 2019. Advocates say digital money can make cross border payments easier, promote financial exclusion and payment system stability. There’s also a number of risks, as some say the surveillance and privacy issue of the central banks able to monitor every transaction. But for all we know they might be doing that already.
China
China is also experimenting in a very large scale with digital currency, when the world arrives in Beijing next winter for the Winter Olympics, they’re going to be using the digital RMB to shop and to stay in hotels and buy meals in restaurants. The world is going to see a functioning central bank digital currency very soon in the coming year.
Europe
The European central banks is working with the European commission and experiments to consider the benefits of the digital euro. It will decide whether to launch the digital euro in mid 2021.
USA
The U.S. is playing catch-up. In late February 2021, Fed Chairman Jerome Powell said the U.S. will engage with the public on the digital dollar this year. In terms of human and institutional engagements the United States is certainly behind the scale and scope of what china and Europe is doing. But on the other hand, being first or second is not what’s important here, it’s about doing it right.
The risks
Power outage
If we solely rely on digital currency and there is a massive power outage or a hack, it could jeopardize the entire system. That's why the central banks say that the CBDCs (central bank digital currencies) will co-exist with other forms of physical currencies.
Paper hands
People may be inclined to pull their money from commercial banks to place it in CDBCs. This can make the financial crisis situation more unstable.
Privacy
Banks love the idea of having your money & selling your data. Governments love it too.
There is a danger that we might end up creating a central honey pot of data. Payment data is very sensitive, we usually don’t want to gather all the data in one place. That's why we should ask ourselves whether we want to collect that data at all?
Some risks explained above are mitigated by decentralization which can be found in cryptocurrencies like bitcoin, Ethereum, Cardona and so on…
Take Away
One thing is certain, Digital currencies will be part of our future. Central banks moving to digital currency for international transactions instead of the traditional SWIFT system is an excellent thing and a long time coming. For regular people though there isn’t really any change. I haven’t used cash more than a dozen times in total over the past 5 years. For young people (at least where I live) cash is a bit of a novelty, and it’s kind of weird to see people use it.
