How the Global Economy Can Be Reshaped by Blockchain and CBDC
To put it mildly, the rise of cryptocurrencies over the past few years has been fascinating. Innovative currency solutions have also been developed, in addition to a number of innovative digital currencies. We’re going to examine one of these innovations in this post, which is CBDC(Central Bank Digital Currency).
We’ll discuss CBDC, how it differs from other coins, and how this rapidly developing technology can be used in the real world. As we know that in Just a few years the demand for blockchain is rising, if you are an enterprise or big company looking for enterprise blockchain consulting solutions, like how we started the blockchain from scratch? Can blockchain is used for multiple business types etc?
CBDC, or Central Bank Digital Currency, is a contraction. It alludes to digital currencies created, distributed, and controlled by a central bank. That is because it sounds somewhat like conventional, physical money.
A stable, digital alternative to fiat currencies is what drives CBDC(Central Bank Digital Currency).CBDC coins can coexist with fiat money, unlike many other cryptocurrencies.
A governing body’s bank issues CBDC coins tied 1:1 to its fiat currency.
A nation that uses CBDC coins will have physical coins, paper money, and digital money with the same value.
What are Stablecoins, Fiat Money, and CBDC:
Those who are more knowledgeable about cryptocurrencies may feel that this sounds a little repetitive. After all, don’t stablecoins already accomplish this? And why would you need CBDC(Central Bank Digital Currency) if you can already send fiat money digitally to someone using an app and a credit card number?
Let’s begin by defining each of these terms:
A fiat currency’s digital representation is called CBDC.
A fiat currency is a conventional, government-issued currency (the U.S. dollar, for example)
A stablecoin is a cryptocurrency whose value is constant (rather than fluctuating like many other cryptocurrencies, making it an investment rather than a true medium of exchange).
Hopefully, this helps you understand how these currencies differ from one another. In practice, one would use physical fiat money, a CBDC when transacting digitally with fiat money (since it’s quicker and cheaper, especially across borders), and a stablecoin as needed.
Growth of CBDCs
Although many people may not be familiar with the concept of a CBDC, it is already starting to catch on. Global banks and regulators are creating CBDC technology to give people a secure, reliable cryptocurrency option.
Here are a few of the most exciting CBDC projects currently underway:-
Project Jasper at the Bank of Canada
The Bank of Canada launched Project Jasper in 2017 as a result of an experimental collaboration between the public and private sectors. In order to better understand how to use distributed ledger technology (DLT), the bank is collaborating with private cryptocurrency organizations.
Project Jasper is currently in Phase 4 of its development. The Bank of Canada is currently developing the technology to make DLT-based cross-border transfers possible. This will speed up and reduce the cost of transferring larger amounts of money.
Project Ubin of the Singapore Monetary Authority
The Monetary Authority of Singapore oversees Project Ubin, which is another public-private partnership project. They’re studying how blockchain and DLT can settle payments and securities.
This has been a multi-year, multi-phase project, with each phase focusing on a different, urgent issue. Project Ubin’s fifth and final phase, which ended in 2020, demonstrated the commercial value of blockchain payment networks by showing how affordable and effective they were in the workplace.
Caribbean: Sand Dollar
The Central Bank of The Bahamas has approached the CBDC industry in a much more sensible manner. Instead of playing around with the technology, it has been actively working to introduce it to its market.
Project Sand Dollar’s ultimate objective is to integrate with current payment service channels so that all payment service providers can use the currency.
Benefits of CBDC
There are many advantages to this specially created CBDC
increase the usability and accessibility of central bank money, eNaira improves the usability and accessibility of central bank money. The Central Bank of Nigeria is assisting its citizens in making purchases with whatever resources they have available by providing a digital alternative to the country’s fiat currency.
It’s a great illustration of how embracing technology can open up new opportunities for people rather than rejecting it or limiting what it can do.
Encourage a Strong Payment Ecosystem
eNaira creates a stronger payment ecosystem. Nigeria is strengthening its financial infrastructure by introducing this technology and expanding its currency’s uses.
This contributes to the financial stability of the nation and creates a more promising future for both it and its citizens.
Boost Tax Revenue and Collection
Tax collection is possible with eNaira, offering a quicker and more convenient alternative to current procedures. Additionally, it can raise tax revenue by decreasing the expenses incurred in tax collection.
Allows For Direct Welfare Payments to Citizens
The advantage of eNaira is that it provides a direct connection for services like welfare payments. This enables the service to instantly deliver vital resources to users. Due to infrastructure updates, these resources are delivered in a more user-friendly format.