As if it were a competition, most of the world's central banks now want to develop their own digital currencies.
A few days ago, our team broke the news that China is rapidly advancing in the design of its currency, the digital yuan. So much so that the Asian giant is already conducting pilot tests on the operation of its CBDC currency in 4 major cities in the country.
For its part, at the beginning of the year, the United States also highlighted that the possibility of implementing its own CBDC currency that digitizes the dollar through blockchain technology is open.
Now the European Central Bank is considering creating the digital euro, mentioning that it is focused on analyzing the creation of a retail CBDC that may be a token that circulates in a decentralized manner and is accessible to everyone.
The central banks of several countries join these initiatives, such as Iran, France, Sweden, United Kingdom, Russia, Türkiye and others, who also announced that they are working on the development of their own digital currencies. Likewise, Russia also indicated that it is among its plans to open a trading center on the border with China, which would be specially designed to work with digital assets.
And not only central banks are joining this initiative, large corporations such as Walmart and Allianz Seguros also highlighted their interest in implementing blockchain technology for the creation of their own digital currencies.
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Digital currencies in the fight for economic power
While the initiatives of several governments and the plans of many others to design their own digital currency may contribute to the development of their countries and improve many services in their different societies, it is also true that this is a power struggle between nations. The first countries and governments to implement the technology blockchain and create their own CBDCs would achieve a better positioning compared to other states that do so later. For this reason, these countries could acquire considerable influence over other nations, which translates into a competitive advantage over their rivals.
For example, in the case of Iran, its desire to implement its own CBDC is intended to avoid sanctions and restrictions imposed by the United States. China, in its case, is on its way to becoming the world's leading economic and technological power to transform the global financial system. Thus, the implementation of its digital yuan CBDC could displace the current position of the US dollar, which can change the rules of the game within the global economy according to several observers who have been monitoring the development of this currency.
But what are stablecoins and CBDCs?
Unlike cryptocurrencies, stablecoins or stablecoins They are a type of cryptographic asset that maintains its stable value. This happens because they are backed by other financial assets, such as fiat money, gold, raw materials or precious metals from countries, and even other crypto assets. In the case of large corporations and companies that implement this type of currency, they are generally backed by the fixed funds of their internal economies.
So, thanks to their characteristics, stablecoins have a potential that is capable of putting the economic stability of countries at risk. For example, China's concern regarding Pound From Facebook It is what has led the country to accelerate the development of its own CBDC.
Let us remember that Facebook's "cryptocurrency" project, called Libra, has faced countless accusations and obstacles to its implementation. First, Libra's features do not meet regulators' standards to prevent the financing of illicit activities. Likewise, the social media giant has suffered several security errors and other irregular aspects, which have left the personal data of the millions of people who use this social network to communicate and interact with each other exposed. But also, the obvious popularity that Facebook has can be particularly negative for the current monetary system, if this network implements a cryptocurrency.
For their part, the CBDC or central bank digital currencies are stablecoins anchored to the currency of each country. These have been designed by central banks in order to digitize their nations' money. Unlike cryptocurrencies and many stablecoins, CBDCs may or may not operate on blockchain or DLT technology.
Learn with Bit2Me: Learn more about Facebook's “cryptocurrency” project
Importance of digital currencies for governments
You don't have to be an expert to realize that Facebook's popularity is due to the fact that people trust this network, despite the security flaws it has presented and the company's constant sale of information.
Still, if Facebook successfully launches a digital currency, users would undoubtedly be drawn to using it as a means of payment due to the enormous national and international impact that a Facebook currency can have. Likewise, Libra can be seen as an alternative for those people who do not have a bank account and much more, so it would be a project that goes beyond the social network. Libra would be a form of local, national and international commerce without limits that implements a form of currency that is not backed by any particular fiat currency, a fact that for governments would threaten the internal economic balance of each country.
Therefore, the need for governments to implement their own digital currencies to face the development of this type of global currencies. Likewise, many governments have realized the great advantages they can acquire through the digitization of their currencies.
Although the future cannot be predicted, stablecoins show clear signs of playing an important role in the transformation of society. Let's hope that the implementations carried out by central banks of this type of assets are for the benefit of society.
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