CBDCs, Bitcoin, Other Cryptocurrencies, and Fiat May be Able to Co-Exist Given Current State of Development: Report
Sovereign governments could potentially be the next group to adopt digital assets, according to a report from the crypto-assets firm octopus.
Kraken writes in an update that the central bank's digital currencies (CBDCs) could become "the newest and perhaps most comprehensive instrument for expanding their monetary policy."
Kraken also mentions that many governments "have signaled their intention to research and use government-sponsored virtual currencies". Christine Lagarde, President of European Central Bank (ECB)has determined that an ECB digital currency could hit the market within the next 4 years, the Kraken team noted.
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“After the COVID-19 shutdown, many governments have given their citizens financial relief. The funds have largely helped people who have lost their jobs, but in countries like the US it has been eight months and some people still haven't received a check. If successfully implemented, CBDCs would allow governments to move towards a cashless society and give people and businesses in need direct access to economic funds. "
While the introduction of these so-called CBDCs appears to be a natural progression towards digitizing money, there is “a lot more beneath the surface”. Kraken Intelligence claims, while adding that their research analysts have looked closely at why governments "are considering their mistakes and what it all means for cryptocurrencies".
As explained by Kraken, CBDCs may resemble decentralized cryptos like Bitcoin (BTC). But their "intention, spirit and use" are quite different. Kraken researchers pointed out that Bitcoin, for example, is based on "individual sovereignty, decentralization and inclusivity". Meanwhile, CBDCs are "centralized, public, and only available within government-set boundaries".
Kraken has published a report describing the structure of CBDCs, the "possible use cases, risks and benefits, current developments by country and the impact of a successfully implemented CBDC". Kraken also researched how these government backed currencies compare to cryptocurrencies and why they believe that CBDCs and crypto assets can "coexist". While they may make payments much more efficient, the "tradeoff can be the financial privacy of consumers - unless citizens ask otherwise," claims Kraken.
Kraken's report states that the proposed designs and concepts of CBDCS lead them to conclude that countries have not yet decided on the boundaries of a CBDC that conforms to current financial structures while ensuring minimal disruption to existing financial markets.
Kraken adds:
“While it is early days to talk about the effectiveness of CBDCs, or even determine the specific intentions for CBDCs of each issuing central bank, we don't think they will replace any other cryptocurrency or even fiat currencies. Ultimately, everyone has their own purpose. "
You can find the full report here.
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